"The availability of five-year fixed rate mortgages has grown at a quicker pace than the two-year fixed rate availability for lower LTV products."
In comparison, five years ago, the number of two-year fixed rate deals available outnumbered five-year deals by 148 and a year ago there was 17 more two-year products to choose from.
Additionally, the gap is continuing to close between two and five-year fixed rates. Five years ago, the average two-year fixed rate mortgage at 60% LTV was 2.17% and the average five-year fixed rate at 60% LTV was 3.10%, meaning that a borrower would have needed to pay a premium of 0.93% when considering an alternative five-year deal. This average premium has now reduced to just 0.26%, with the average two-year fixed rate at 60% LTV falling to 1.81% and the five-year average falling to 2.07%.
Darren Cook, finance expert at Moneyfacts, said: “It is clear from our analysis that over the past five years, the availability of five-year fixed rate mortgages has grown at a quicker pace than the two-year fixed rate availability for lower LTV products. Intense competition among mortgage providers seems to have resulted in the two-year fixed rate market becoming saturated, margins becoming squeezed and mortgage providers looking to entice borrowers to consider a longer five-year fixed rate deal as an alternative.
“Healthy competition within the five-year fixed mortgage rate market is good news for borrowers, as an increase in the number of available products will generally push rates down and introduce longer-term options that borrowers may have not previously considered.
“Historically, borrowers seemed to have preferred the short-term commitment of a two-year fixed rate deal, but now that product availability has significantly increased in the longer-term five-year mortgage market, borrowers may be looking beyond interest rates and more towards the stability of setting monthly mortgage repayments and hedging themselves against uncertain economic conditions in the longer term."
