Borrowers with large deposits are seeing a shift in mortgage pricing dynamics, as the average 2-year fixed mortgage rate for a 60% loan-to-value (LTV) has dipped below its 5-year equivalent for the first time since the Liz Truss 2022 mini-Budget.
According to the latest figures, the average 2-year fixed rate at 60% LTV now stands at 4.18%, marginally lower than the 5-year equivalent at 4.19%.
It marks a reversal of the typical pricing structure, where longer-term deals tend to be cheaper and highlights changing lender strategies amid evolving economic conditions.
According to Rightmove analysis last week the most competitive 2-year fixed rate currently available is 3.86%, compared with 3.89% for the lowest 5-year fix.
GROWING TREND
Matt Smith, Mortgage Expert at Rightmove, says: “For those with the largest deposits, a typical 2-year fixed rate mortgage is now lower than the equivalent 5-year, the first time we’ve seen this since the mini-Budget.
“This reflects the growing trend that it’s becoming cheaper for lenders to price shorter-term rather than longer-term deals. The global tariffs situation has likely accelerated this move.
“Mass-market average rate trends should gradually follow, and a Bank Rate cut in May will give lenders some more headroom for further rate cuts.”
BUYER BOOST
Toby Leek, President of NAEA Propertymark, reckons the change could offer a boost to buyers able to meet the required LTV threshold.
“This is a huge positive for those who qualify… It demonstrates yet further positivity for people to seek an attractive mortgage deal for themselves,” he says.
He adds a note of caution though, highlighting the importance of considering future affordability when choosing between short- and longer-term fixed rates.
The narrowing gap between short- and long-term mortgage rates reflects growing expectations that interest rates may fall in the coming months, prompting lenders to adjust their pricing to stay competitive.
