The gap between 2-year and 5-year fixed mortgage rates has narrowed to its smallest margin in two years, data by Better.co.uk has revealed.
Currently, the best rates for 2-year fixes sit at 4.82%, while 5-year fixes are at 4.61% for new buyers.
Data showed that fixed-rate mortgages remain popular, with eight out of 10 mortgage customers choosing them, according to the BBC.
Jonathan Bone, head of mortgages at Better.co.uk, noted that about 800,000 fixed-rate mortgages with interest rates of 3% or lower are expected to expire yearly until 2027.
2-year fixed rates provide consistent monthly repayments but may lead to higher payments once they revert to a lender’s standard variable rate (SVR).
The 2-year deals typically offer lower rates and flexibility, but involve regular remortgaging costs and potential rate increases.
5-year fixed rates offer stability and protection from rising rates but carry early exit fees and the risk of missing out on lower rates if they drop.
Currently, 5-year fixes unexpectedly have lower rates than 2-year ones.
Bone said: “If your fixed-rate loan expires, you can do nothing but revert to your lender’s SVR mortgage.
“However, this option will likely be significantly more expensive.
“As interest rates for 5-year fixed-rate mortgages are lower than a 2-year fixed-rate, it may be best to shop for a 5-year term.”
