In addition, 35% say they have taken significant pay cuts in the last five years to avoid laying off workers. Of these, 60% say these cuts have lasted more than a year and 17% say they could go on indefinitely.

Of the business owners that have taken a pay cut, 70% have reduced them by as much as a half, while 5% have scrapped their salaries completely.

Janet Connor, managing director at More Than, said: “Business owners care about the bottom line and rightly so. It’s sad that so many small business owners have had to remortgage their homes and take hefty pay cuts, but at the same time it shows real compassion on their part that they’re prepared to sacrifice personal gains for the sake of their staff.

“This research shows that the trading environment for small businesses remains tough but the latest set of results from the Business Inflation Guide (BIG) suggests they might be able to look forward to the summer with greater optimism: the relatively low 0.31% increase in costs for Q4 2011 follows an even smaller 0.05% increase in Q3. Things won’t change overnight, but this is good news.”

The company claims the average rate for two-year fixed-rate mortgages fell to 3.82% in October 2011 but has since risen to 4.15%. Five-year fixed rates fell to 4.57% in January, but have since risen to 4.72%, while two-year tracker rates have risen from 3.37% in August 2011 to 3.63%.

Approximately one million customers will be affected by the SVR increases set to be introduced by Halifax, The Co-operative Bank, Bank of Ireland and RBS/NatWest in May. The average increase will be 0.62%.

Clare Francis, mortgage expert at MoneySupermarket.com, said: “Mortgage rates are nudging upwards, so anyone looking for a mortgage or whose mortgage deal will end in the next few months should act sooner rather than later to secure one of the current rates in case they rise further.

“Borrowers paying their lender’s SVR should also reassess their mortgage arrangements. One of the consequences of the low base rate has been the fact that SVRs have been similar to the rates on new mortgage deals, and in some cases the SVR has been even lower.

“As a result, an increasing number of people have opted to stick with their existing lender and move onto the SVR when their fixed or introductory tracker or discounted period ended, as opposed to remortgaging elsewhere.

“However, as around one million borrowers are about to find out next month, many SVRs can rise even if base rate doesn’t.”

Dubbed ‘mortgage prisoners’, many homeowners have been affected by the rises in standard variable rate mortgages; some of which have risen as much as 0.5%. Customers who have been unable to access fixed-rate alternatives due to the fact they don’t meet the now stricter lending criteria of banks are literally trapped in their existing – and escalating – mortgage deals.

A customer with a £150,000 mortgage that has 20 years to run can expect to pay almost £40 a month more if their variable rate mortgage rises from 3.5% to 3.99%; the amount Halifax recently raised it SVR mortgages by.

Already stretched families will likely be the ones hit hardest having to find almost £500 a year more to meet mortgage repayments.

Help is at hand for ‘mortgage prisoners’

However, the Financial Services Authority has been working to make it easier for those who are trapped in an existing mortgage deal and find themselves battling ever tighter lending criteria.

Its Mortgage Market Review announced that homeowners will be able to remortgage based on their repayment history rather than affordability, so those who have kept up with their payments should now be in a better position.

To benefit from the measure, prospective remortgage customers must simply be able to demonstrate a good payment history going back at least 12 months and must not be looking to borrow additional funds.

The upshot is that borrowers will have more choice as to whether they stay with their existing lender or decide to remortgage with a competitor.

Association of Mortgage Intermediaries director, Robert Sinclair, said: “We need to ensure that people do not get trapped on escalating variable rates, unable to access the protection afforded by fixed-rate alternatives that might be cheaper in the longer term.”

Getting advice from an expert

Another major problem is that customers who have a remortgage application refused are likely to find it harder to obtain a mortgage loan elsewhere. Some experts believe using a mortgage broker could help, as brokers offer advice on the whole mortgage market rather than a single lender’s limited portfolio of products.

Ultimately, it seems the 1.6 million customers with interest-only mortgages are likely to struggle the most when they try to remortgage. It’s not surprising that people are looking to save money by opting for interest-only mortgages, but doing so means none of the capital is being paid off, so customers could easily find themselves in negative equity.

Karen Barrett, chief executive at unbiased.co.uk, commented: “To avoid any kind of payment shock when you remortgage and to ensure you have paid a considerable chunk of your mortgage off before you retire, it is vital to see a whole-of-market mortgage adviser. 

“They will be able to help you get the best mortgage deal possible which matches what you can afford.”

New Products include: a two-year tracker at 3.99% up to 75% LTV, with a 3.5% fee; and a lifetime variable rate at 4.99% up to 65% LTV, with a 1.75% fee. Both deals are available for purchase and remortgage.

Further cashback options are also available on selected purchase and remortgage products.

Tracie Pearce, head of product management and pricing at The Mortgage Works, said: “We are very pleased to announce new buy-to-let products and rate improvements on existing fixed-rate products, designed to give intermediaries and their clients even more options to choose from.

“The new two-year tracker in particular offers a very competitive rate and the re-launch of the lifetime variable product with early repayment charges until November 2012 gives landlords additional flexibility when managing their buy-to-let investment.

“We regularly review our mortgages to ensure their relevance and competitiveness in the market place and these changes are a further example of that.”

January saw a drop in the number and value of loans taken out for remortgage. CML data shows that 26,600 loans (worth £3.6 billion) were taken out, down from 28,200 (worth £3.5 billion) in December.

Remortgage lending experienced its first year-on-year fall since the end of 2010, with the number of loans down 13% and the value down 5% from January 2011.

CML figures show 35,600 loans (worth £5.3 billion) were taken out for house purchase in January, a 22% increase in volume and a 23% rise in value year-on-year. However, this was a 25% drop in volume and a 24% decrease in value compared with December 2011 figures.

Director general of the CML, Paul Smee, said: “We traditionally see a substantial fall in lending figures at the start of the year, reflecting the lack of enthusiasm by buyers to move house during the post-Christmas months, and this January has been no exception.

“But the year-on-year rise in house purchase lending suggests that lending levels are generally rising although we expect the trajectory to be bumpy rather than smooth this year.”

NatWest’s two-year fixed-rate product up to 80% loan-to-value (LTV) has been reduced by 0.10% from 3.79% to 3.69%, while its two-year fix up to 75% LTV has also dropped 0.10% from 3.29% to 3.19%.

Rates on the lender’s 60% LTV buy-to-let purchase and remortgage deals have also fallen. Its two-year, fixed-rate rates will drop from 3.99% to 3.79% and its two-year tracker rates will decrease from 3.49% to 3.39%.

Graham Felstead, head of intermediary channel, NatWest Intermediary Solutions, says: “We have continued to support the first-time buyer market by offering 90% LTV mortgages and accepting applications from government-backed shared equity schemes, so I am delighted with the rate reductions on our 90% LTV mortgages in both our core and corporate ranges.”

The ten-year, fixed-rate product has a completion deadline of May 1 and customers must be able to pay up to 10% of the original advance per annum.

Keith Barber, associate director of business development at National Counties, said: “Rises in the cost of living, coupled with increasing demands on family finances to help support younger generations and lower returns from pension funds than we’ve been used to in the past, mean that it is understandable that increasing numbers of people are approaching, or are in retirement, with mortgages and other loans outstanding.

“Our ten-year, fixed rate remortgage product can help people put in place a structured and affordable repayment plan which offers the reassurance of known monthly repayments due to the fixed interest rate.

“We take our lending responsibilities very seriously and our experienced underwriters individually assess each application.

“This approach enables us to look at each case on its merits. We are committed to offering solutions which will support existing homeowners at a time when family finances are under pressure.”

Bank of England figures show that 52,854 mortgage loans were approved for home buyers in November 2011, up by 68 compared with October data.

Gross mortgage lending totalled £12.6 billion in November, higher than the previous six-month average of £11.7 billion.

David Braithwaite, director of Citrus Financial Management, told Mortgage Introducer: “The material drop in the number of remortgages may reflect how, as the eurozone crisis escalated and the economy deteriorated in the late autumn, people became even more confident that interest rates are going nowhere for quite some time.

“The fall in remortgage activity may also reflect declining equity levels in the UK’s housing stock as house prices continue to slide downwards.”

The new homebuyer and remortgage deals will be offered to customers with loans of between £75,000 and £500,000, excluding those buying new builds or flats. Mortgage fees will start from £495 and several offset mortgages will be made available.

Accord mortgage product manager, Martin McIntosh, says: “Our range of 85% LTV deals has proved to be attractive to first-time buyers and feedback from brokers has shown an appetite for greater competition in the 90% LTV market.

“Our move into this area represents a measured yet positive step, supporting the intermediary market as we embark on a new year of lending.”

Remortgage lending from the UK’s largest UK lenders totalled £3.7 billion in October, compared with £2.9 billion the previous October.

However, remortgage lending fell slightly month on month from £3.8 billion lent in September.

Total gross mortgage lending totalled £10 billion in October, a slightly drop from £10.1 billion in September but an 8.7% rise from £9.2 billion in October 2010.

Economist at Capital Economics UK Samuel Tombs says: “The number of mortgage approvals for new house purchase rose from approximately 51,200 in September to 52,700, but this just reversed September’s drop.

“Rapid falls in employment and real earnings, as well as deteriorating conditions in wholesale funding markets, suggest that approvals are unlikely to keep rising.”