There has been a significant fall in the volume of mortgage products offered to borrowers as lenders pulled more than 500 deals, and average rates hit seven-year high, new research shows.

There were 518 fewer mortgage products available at the start of March compared to the beginning of February, according to Moneyfacts.

Overall average two- and five-year fixed rates for all LTVs have increased for the fifth consecutive month, rising by 0.21% and 0.17% respectively.

At 2.65%, the two-year average is the highest recorded since November 2015 (2.67%), and the five-year equivalent of 2.88% is the highest seen since April 2019 (2.88%).

Moneyfacts said this was the biggest monthly fall in availability since May 2020, when 626 products were pulled as a result of uncertainty and disruption caused by the pandemic.

This left 4,838 deals for borrowers to choose from, 384 fewer than were on offer in March 2020.

Many lenders have merely responded to increases in the Bank of England’s base rate by removing individual products from the market, while others have suspended lending for particular deposit sizes.

Eleanor Williams, Finance expert at Moneyfacts, said: “Borrowers contemplating securing a new mortgage deal may be disheartened to see that rates are continuing to rise this month. Fuelled by uplift across LTV tiers, the overall average two- and five-year fixed rates have both continued their climb. After an increase of 0.21% to 2.65% this month the two-year average is now the highest it has been in over six years (Nov 15 – 2.67%) and at 2.88% the five-year equivalent was last this high in April 2019 (2.88%). However, those coming off a maturing five-year fixed deal from 2017 may be able to secure a competitive deal as the average rate remains 0.05% below where it sat in March 2017 (2.93%).

“The level of product choice took a nose-dive this month, reducing by 518 deals to leave 4,838 deals for borrowers to choose from. This is the biggest monthly drop in mortgage availability since May 2020 (626) during the mass product withdrawals recorded in the early stages of the pandemic and leaves borrowers with 384 products fewer than were on offer in March 2020 (5,222). As well as selected product withdrawals, we have seen providers revamp their product ranges with a number pulling whole LTV brackets and in one case temporarily withdrawing their entire range. Processing almost double the number of product updates from lenders this month as in February, this has seen mortgage product shelf-life plummet by 14 days, from 42 to just 28, giving prospective mortgage customers just a short period to secure their chosen deal. This may indicate lenders are focusing their offerings by adapting their range to keep up with the fluid changes and borrower demand.

“The only LTV tier where product availability improved was at 95%, which saw an uplift of seven deals, bringing the total to 342. However, March marked the first time that the two-year fixed average rate at 95% LTV has risen since April 2021, going up by 0.06% to 3.11%. The equivalent five-year fixed rate increased for the second consecutive month, inching up a further 0.02% month-on-month to 3.37%. In this sector of the market often favoured by first-time buyers with limited deposits, it’s not too surprising to see lenders continuing to accommodate borrowers with choice, but rate rises across the mortgage LTV spectrum appear to be an inevitable outcome after two base rate rises.

“While factors beyond lenders’ control are uncertain, as the cost of living crisis continues and economic conditions are volatile, to mitigate the risk of default, it could be that providers may tighten their lending belts even further moving forwards. Borrowers looking to get onto the property ladder or to remortgage may therefore be wise to seek advice to ensure they are abreast of the changing market and to move forwards with securing the most suitable deal for them.”