Five-year fixed rate premium at six-year low
The rate gap between two-year and five-year fixed rate mortgages has fallen to its lowest level in six years, according to Moneyfacts.
It means that borrowers who want to lock into a rate for longer-term security only pay a small premium compared to taking a short-term deal.
Mind the rate gap
The rate gap stands at 0.41% today, down from 0.44% on average for the whole of 2018, which in itself marks a fall from 0.57% in 2017 and from 0.64% in 2016.
Rachel Springall, Finance Expert at Moneyfacts.co.uk, said: “The mortgage rate war may have dulled in comparison to the golden years of cheap funding schemes, but so far this year some of the biggest lenders in the market have taken aim at their pricing to entice new borrowers.
“Since the start of January, several big brands including Barclays, HSBC, Lloyds Bank, NatWest and Santander have all cut rates across their range of two and five-year fixed deals.
“As it stands, the average two-year fixed mortgage rate of 2.50% is just 0.41% lower than the current average five-year deal of 2.91%, so despite average rates overall rising since the record lows seen in 2017 (in October 2017 the average two and five-year fixed rates were 2.21% and 2.76% respectively), the gap is smaller.
“While it is difficult to predict what the mortgage market may face in 2019, it is still positive to see the rate gap shrink, particularly for those borrowers eyeing up a five-year fixed deal who want to avoid any potential interest rates rises for some peace of mind.”