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 Moneyfacts.co.uk.
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.”