The number of deals on the market has steadily declined since October when the number of products reached a nine-year high of 4,815, according to Moneyfacts.
There are now around 300 fewer mortgage products – with first-time buyer and high loan to value (LTV) deals suffering the biggest fall in availability.
At the same time, the average two-year fixed rate has jumped from a record low of 2.2% in October to 2.35% in January 2018.
The changes have been attributed to November’s base rate hike when the Bank of England upped core rates to 0.5%, marking the first rise in a decade.
Lenders waiting for ‘dust to settle’
Charlotte Nelson from Moneyfacts said the data shows competition among providers is starting to slow.
She added: “The reduction in availability has been most keenly felt at the higher loan-to-values (LTVs), with 74 products being withdrawn from the 90% and 95% LTV markets since November, not to mention four providers exiting the 95% LTV sector in just two months.
“This suggests that lenders are simply unsure of how to price these products after the base rate rise.
“Providers may be choosing to wait for the dust to settle from the rate rise in November, to see how the land lies.
“However, borrowers should not despair as rates are still historically low and a good deal can still be had, but they have to be savvy and shop around to ensure the most cost-effective option is maintained.”