Mortgage Rate Gap Narrows, but Pricing Remains Elevated
As of January 2025, the disparity between average two-year and five-year fixed-rate mortgages in the UK has diminished to its narrowest margin in two years. Data from Moneyfacts reveals that the average two-year fixed rate has decreased by 0.04% to 5.48%, while the average five-year fixed rate has declined by 0.03% to 5.25%.
This convergence offers borrowers more options, with the total number of mortgage products rising to 6,508 from 5,899 at the beginning of 2024. Despite this increased availability, mortgage rates remain relatively high, influenced by ongoing economic uncertainties and potential interest rate fluctuations.
Rachel Springall, a finance expert at Moneyfacts, notes that while the reduced gap may appeal to those seeking shorter-term fixed mortgages, the lower average rate of five-year fixed deals might attract borrowers desiring longer-term payment stability. She cautions that persistent inflation and market volatility could delay anticipated reductions in fixed mortgage rates.
In summary, although the narrowing gap between two-year and five-year fixed mortgage rates provides borrowers with more choices, the overall elevated pricing underscores the importance of careful consideration and professional advice when selecting a mortgage product in the current economic climate.
Source: Estate Agent Today
