Insights from the Moneyfactscompare website showed that the share of visitors comparing two-year fixed rate mortgages rose from 48.4% in February to 55.6% in May, while interest in five-year fixes fell from 27.7% to 21.8%.
Over the same period, demand for 10-year fixes fell from 6.5% to 4.5%.
Moneyfacts said people were taking a “calculated risk” in the hopes that rates would fall by the time their initial rate ended.
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Mortgage search demand on moneyfactscompare.co.uk
|
Mortgage |
Feb |
March |
April |
May |
|
Two-year fix |
48.4% |
54.8% |
53.6% |
55.6% |
|
Five-year fix |
27.7% |
25.1% |
23.2% |
21.8% |
|
10-year fix |
6.5% |
4.6% |
5.3% |
4.5% |
This is also despite the average five-year fixed rate being lower than its two-year counterpart in May, at 5.68% and 5.78% respectively.
Moneyfacts average mortgage rate by term (all LTVs)
|
Mortgage |
1 Feb |
1 March |
1 April |
1 May |
|
Two-year fix |
4.85% |
4.84% |
5.84% |
5.78% |
|
Five-year fix |
4.94% |
4.96% |
5.75% |
5.68% |
|
10-year fix |
5.6% |
5.61% |
6.01% |
6.15% |
Borrower decisions are not driven by pricing
Adam French, head of consumer finance at Moneyfactscompare.co.uk, said demand was shifting towards two-year fixed rate mortgages, while the appeal of five- and 10-year fixes declined.
French added: “However, this trend is not being driven purely by pricing. On 1 May, the average five-year fixed mortgage rate stood at 5.68%, 10bps below the average two-year fixed rate of 5.78%. Despite this, borrowers continued to favour shorter fixed-term deals.
“It appears many borrowers believe the recent spike in mortgage rates will prove temporary and are willing to pay a small premium for a shorter fix in the expectation that they will be able to refinance onto a more competitive deal in the future.”
He said the continued decline in demand for 10-year fixes backed this up, adding: “Unsurprisingly, borrowers are reluctant to commit to today’s rates for the long term, despite the payment certainty these products can offer.”
