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Gap between two and five-year fixed mortgage rates lowest since 2013

  • 25/06/2018
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Gap between two and five-year fixed mortgage rates lowest since 2013
The gap between the average two and five-year fixed rate mortgage has shrunk by 0.16% in just one year, to hit the lowest level since August 2013, according to data.

Research from Moneyfacts has revealed that as two-year fixed mortgage rates continue to rise, five-year fixed rate mortgages look more appealing.

Borrowers looking for a mortgage now may be unsure of whether to choose a traditional two-year fixed rate deal or opt for the security of a longer-term fix, according to Charlotte Nelson, finance expert at

It comes as  the average two-year fixed rate has increased from 2.35% at the start of the year to 2.52% this month.

Meanwhile, the average five-year fixed rate has been rising at a much slower pace, having increased by just 0.05% since January, Moneyfacts data showed.

Nelson added: “This has narrowed the gap between the two products dramatically.

“Although the sharp increase in the average two-year fixed rate can be predominately explained by base rate uncertainty, providers also play a part, as they look to shore up their mortgage book ahead of any future rises by the Bank of England.

“Specifically, lenders are hoping to entice borrowers onto a longer-term option by keeping their five-year fixed rate deals competitive, which is why the two-year fixed rates have sped up but the five-year rates haven’t.

“Borrowers seem to be just as eager to secure their future, as many are moving away from the traditional two-year fixed rate deals, with remortgage demand for five-year fixed rates increased to 47% – almost half of the remortgage market.”

Based on the average fixed rates, it would only cost a borrower £40.87 more per month if they were to opt for a five-year deal instead of a two-year option, according to Moneyfacts.

Nelson added: “This is great news for borrowers looking for long-term security, however, with five-year fixed rates starting to creep up this may not last forever.

“Borrowers considering a deal should act fast to ensure they do not miss out on the best possible products.”

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