22 Dec 2024

73% Increase in 5 Year Fixed Mortgage

Moneyfacts research has revealed a shift in the mortgage products lenders want to sell as the number of five-year fixed rate mortgages increased by 73% in the last 12 months.

By comparison, the traditionally popular two-year fixed rate mortgages have only increased by 33%.

Mortgage Product numbers
	Apr-12	Apr-13
2 year fixed	848	1,125
5 year fixed	366	634
Source: Moneyfacts.co.uk

Rates have also tumbled and whilst unsurprisingly the less risky 60% loan-to-values (LTV) have benefited most, at a 75% LTV the rate difference between the average two-year and five-year fixed is just 0.04%.

Average Mortgage Rates
	Apr-12	Nov-12	Dec-12	Jan-13	Feb-13	Mar-13	Apr-13
Average 2 year fixed (90%)	5.45%	5.30%	5.27%	5.12%	4.75%	4.61%	4.59%
Average 2 year fixed (75%)	4.44%	4.10%	4.02%	3.98%	3.91%	3.62%	3.50%
Average 2 year fixed (60%)	4.24%	4.03%	3.96%	3.95%	3.85%	3.59%	3.50%
	Apr-12	Nov-12	Dec-12	Jan-13	Feb-13	Mar-13	Apr-13
Average 5 year fixed (90%)	5.64%	5.46%	5.34%	4.27%	5.10%	4.96%	4.94%
Average 5 year fixed (75%)	4.37%	4.01%	3.84%	4.47%	3.70%	3.62%	3.54%
Average 5 year fixed (60%)	4.30%	3.67%	3.51%	4.26%	3.47%	3.27%	3.22%
Source: Moneyfacts.co.uk

Sylvia Waycot, Editor at Moneyfacts.co.uk, said:

“Five-year fixed rate mortgages have traditionally been a bit too expensive to be the first choice for most of us, however, thanks to lenders enjoying cheap loans from the Government this is changing.

“Borrowing the money is conditional to it being lent out in the form of mortgages and loans to SMEs and as the two-year fixed market is already saturated lenders are now heading full pace into the five-year arena.

“For once, this is actually excellent news. Mortgage rates have been on a downward trajectory for the last six months and the gap between fixing for two or five years is closing.

“Fixing your mortgage gives peace of mind from rate fluctuation and is also favoured as a means of household budgeting as you know from the outset what your payments will be for a set time period.

“Of course, it is one thing to have the shop window full of attractive offers, but for it to truly succeed, lenders need to step away from the rigid, risk-averse policies that have prevented them from lending over the past few years.”

Moneyfacts Group

Moneyfacts is the UK’s leading independent provider of personal financial information and our data is used and trusted throughout the financial industry.

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