Average two-year fixed mortgage rate now below five-year fix – Moneyfacts

Data from Moneyfacts showed there was a marginal difference between the two, as the average two-year fixed mortgage rate was 5% and the average five-year fixed mortgage rate was 5.01%. 

The gap was wider in September 2022, as the average two-year fixed rate was 4.24%, while the rate was 4.33% for a typical five-year fix. 

The differential has slowly been narrowing, with the Moneyfacts data showing that in August 2023, the average two- and five-year fixed mortgage rates were 6.85% and 6.37% respectively, a 48 percentage point difference. By the same month in 2024, these were 5.77% and 5.38% respectively, making the difference 0.38%. 

Then, in July this year, the average two- and five-year fixed mortgage rates were 5.09% and 5.08% respectively, putting the two-year product just 0.01% above the five-year option. 

Rachel Springall, finance expert at Moneyfactscompare.co.uk, said: “Millions of borrowers coming off a fixed rate deal this year will be delighted to see fixed mortgage rates on the downward trend, with the average two-year fixed rate dipping below its five-year counterpart for the first time since September 2022. Back then, mortgage rates started to rise dramatically, in the aftermath of the ‘mini Budget’, and it caused mass panic for those struggling to buy their first home. Thankfully, time is a healer, with lower rates, much more market stability and a relaxation in stress testing, mortgage prisoners might now be free to refinance. 

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“The end of the inversion in the two- and five-year fixed rates, if sustained moving onward, will bring borrowers back to a more traditional mortgage market, where it’s more expensive to secure a longer-term fixed mortgage. Lenders will no doubt be keeping a close eye on swap rates and react quickly should the path change in the coming weeks. This may well be the time for borrowers to act quickly to secure a deal, so it’s wise for them to seek advice to navigate the mortgage maze.”