Moneyfacts: More choice for 5-year fixes at lower LTVs

Michael Lloyd

January 13, 2020

For those borrowers who can raise a 25% deposit or greater, there are over 600 5-year fixed rate mortgage deals available to choose from Moneyfacts has found.

The number of 2-year deals available is slightly less at 592.

This is a shift from data recorded five years ago, where the number of 2-year fixed rate deals available outnumbered 5-year deals by 148.

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 2-year fixed rate availability for lower LTV products.

“Intense competition among mortgage providers seems to have resulted in the 2-year fixed rate market becoming saturated, margins becoming squeezed and mortgage providers looking to entice borrowers to consider a longer 5-year fixed rate deal as an alternative.

“Healthy competition within the 5-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.”

Five years ago, the average 2-year fixed rate mortgage at 60% LTV was 2.17% and the average 5-year fixed rate at 60% LTV was 3.10%.

This means that a borrower would have needed to pay a premium of 0.93% when considering an alternative 5-year deal.

This average premium has now reduced to just 0.26%, with the average 2-year fixed rate at 60% LTV falling to 1.81% and the 5-year average falling to 2.07%.

Cook added: “Historically, borrowers seemed to have preferred the short-term commitment of a 2-year fixed rate deal, but now that product availability has significantly increased in the longer-term 5-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.

“As with any mortgage, it is important that borrowers weigh up the overall true cost of any deal and make sure that a longer-term deal is suitable for their specific needs.”

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