According to Moneyfacts, this is nearly double last year’s average two-year fixed rate of 2.52 per cent.
The average five-year fixed rate has also continued to climb, going from 4.08 per cent since the start of August to 4.24 per cent currently. This is also up from 2.75 per cent in August last year.
The difference between two and five-year fixed rate has halved from 0.3 per cent to 0.15 per cent.
Eleanor Williams, finance spokesperson at Moneyfacts, said: “The narrowing cost benefit of two-year compared to five-year fixed rates may incentivise consumers to consider the added security of fixing payments for a longer term.”
The average 10-year fixed rate has stayed roughly stable from 4.19 per cent at the start of the month to 4.2 per cent. This is also a rise from three per cent in August last year.
Williams explained that those wanting to fix for longer were in a better position as 10-year fixed rates had “barely changed” and was 0.04 per cent than the current five-year fixed rate average.
She continued: “In the volatile swap-rate arena, shorter-term rates of up to two years have recently been more expensive than their longer-term five and 10-year equivalents, indicating risks are seen as greater in the near future than in the longer-term, and therefore feeding into lower pricing for consumers on corresponding mortgage products.”
The report added that the level of choice has continued to fall, decreasing by 269 products to 4,138 products on sale currently.
Williams said: “We have seen lenders withdraw parts of, or entire product ranges, with a number citing the pause in lending being due to unprecedented demand. Providers need to manage their service levels following an influx of applications, as borrowers have rushed to secure deals before rates have a chance to climb even further.”
Earlier this month, Moneyfacts revealed that the shelf life of products had fallen to a low of 17 days, down from a record low of 21 days in June this year.
Williams urged consumers wanting to mitigate the cost-of-living crisis with a new fixed rate deal should seek advice as it was a “very changeable landscape”.
She said: “Locking in to a decade-long fixed deal could be a double-edged sword; mortgage rates are currently on an upwards trajectory and there is anticipation that further base rate rises could impact the sector, so securing a long-term, stable fixed rate deal may well be foremost in many consumers’ minds.
“However, there may equally be others who believe rates could fall over that time, and as many deals in this sector carry hefty early repayment penalties, some may be concerned they may be tied in to a higher rate and repayments, should cheaper deals resurface down the line.”