Shorter-term fixed rate mortgages could be the preferred option for borrowers as the difference between the average two- and five-year pricing shrinks, a property listing firm predicted.
In its weekly report, Rightmove found that the average two-year fixed mortgage rate was 4.93%, while the five-year fix average was 4.73%.
This signified reductions of 0.04% since last week.
Matt Smith, mortgage expert at Rightmove, said: “The gap between the average five-year fixed rate and two-year fixed rate is now just 0.2%. This time last year, it was nearly double that. Average two-year and five-year fixed rates are at their closest since before the mini Budget, which naturally means shorter terms will become more popular.
“We’re already seeing a larger proportion of movers choose two-year deals compared with the peak-rate period. We may even see some two-year products become the cheaper option for some product types this year.”
How the housing landscape is set to shift
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Will there be a sub-4% trend?
The lowest available rate for a two-year fix was 4.15%, flat on last week, while the lowest five-year fixed rate was 3.99%, a 0.01% fall.
This came as lenders Barclays and Santander introduced sub-4% rates this week.
Smith added: “The first sub-4% rate is a big sentiment boost for the market, after a fairly bumpy start to the year where lots of economic news has been thrown at us. Expect to see other lenders follow suit over the next few weeks to try and capitalise on the busiest period of the year for the home moving market.
“The big test will be whether this positive momentum continues later in the year, and more mass-market movers are able to access rates closer to 4% – the average is still closer to 5%.”
Mortgage rates continue declining
Rightmove found that average mortgage rates continued to fall on a weekly basis across all loan-to-value (LTV) tiers.
At 60% LTV, the average two-year fixed rate was 0.07% lower than a week ago at 4.32%, while the average five-year fixed rate fell by 0.04% to 4.22%. Compared to last year, the average two-year fixed rate was 0.15% cheaper, while the average five-year fix was 0.05% more.
For a two-year fix at 75% LTV, the average rate was 4.73%, 0.05% lower than last week and 0.14% down on a year ago. The average five-year fixed rate was 0.04% less than last week at 4.59%. This was 0.01% down when compared to 2024.
At 85% LTV, the average two-year fixed rate was 4.87% and the average five-year fix was 4.73%, both 0.03% lower than last week. Compared to last year, the two-year fix was 0.19% less on average, but the five-year fix was 0.07% higher.
At 90% LTV, the average two-year fix was 0.04% lower at 5.3%, while the average five-year fix was 0.03% cheaper at 4.95%. These were both higher than a year ago, up 0.02% and 0.11% respectively.
Average rates at 95% LTV fell marginally, with a 0.01% drop in the typical two-year fix to 5.68% and a 0.02% fall in the five-year fix to 5.37%. Last year, these were 0.13% lower and 0.01% higher respectively.
Smith said: “It’s another week of average rate drops, and the response from the market since the bank rate cut has been positive.
“We hope to now see a sustained period of mortgage rates trickling downwards to lead us through the spring selling season.”
