Mortgage borrowers are increasingly favouring shorter-term fixed-rate deals despite them carrying higher average rates than longer-term alternatives, according to analysis of search activity on Moneyfactscompare.co.uk.
The proportion of users comparing two-year fixed-rate mortgages rose from 48.4% in February to 55.6% in May. Over the same period, interest in five-year fixed deals fell from 27.7% to 21.8%, while searches for 10-year fixed mortgages declined from 6.5% to 4.5%.
The shift comes despite the average five-year fixed mortgage rate standing at 5.68% in May, below the average two-year fixed rate of 5.78%.
The figures suggest some borrowers are opting for shorter-term fixes in the expectation that mortgage rates may fall in the coming years, allowing them to refinance sooner rather than locking into a longer-term deal at current rates.
Mortgage search demand on moneyfactscompare.co.uk
| Mortgage | Feb | March | April | May |
| 2-year fix | 48.4% | 54.8% | 53.6% | 55.6% |
| 5-year fix | 27.7% | 25.1% | 23.2% | 21.8% |
| 10-year fix | 6.5% | 4.6% | 5.3% | 4.5% |
Monthly share of users of moneyfactscompare.co.uk comparing mortgage products by term. Users can compare multiple product types and terms per session. Source: Moneyfactscompare.co.uk
Moneyfacts Average Mortgage Rate by term (all LTVs)
| Mortgage | 1 Feb | 1 March | 1 April | 1 May |
| 2-year fix | 4.85% | 4.84% | 5.84% | 5.78% |
| 5-year fix | 4.94% | 4.96% | 5.75% | 5.68% |
| 10-year fix | 5.60% | 5.61% | 6.01% | 6.15% |
Average advertised rate for new fixed rate mortgages by term (all LTVs) on a first of month basis. Source: Moneyfactscompare.co.uk
Adam French, head of Consumer Finance at Moneyfactscompare.co.uk, said: “The latest search data from Moneyfactscompare.co.uk reveals that demand is increasingly shifting towards two-year fixed-rate mortgages, while the attraction to five and 10-year fixes continues to decline.
“However, this trend is not being driven purely by pricing. On 1 May, the average five-year fixed mortgage rate stood at 5.68%, 10 bps below the average two-year fixed rate of 5.78%. Despite this, borrowers continued to favour shorter fixed-term deals.
“It appears many borrowers believe the recent spike in mortgage rates will prove temporary and are willing to pay a small premium for a shorter fix in the expectation that they will be able to refinance onto a more competitive deal in the future.
“The continued decline in demand for 10-year fixes backs this up. Unsurprisingly, borrowers are reluctant to commit to today’s rates for the long term, despite the payment certainty these products can offer.
“Unlike homeowners in some other countries who routinely fix their mortgage rates for decades British borrowers want the security of a fixed monthly repayment but value the flexibility of shorter-term deals. Regardless of the volatility of the last few years many seem to be positioning themselves for a future where mortgage rates are lower than they are today.”
Mary-Lou Press, NAEA Propertymark president, has warned that borrowers should avoid making decisions based solely on rate forecasts.
She said: “Affordability, future plans, and potential early repayment charges remain key considerations, making professional advice more important than ever in today’s market.
“This trend also reflects a housing market where confidence is improving. Buyers appear more comfortable making long-term property decisions without feeling the need to lock into a mortgage product for five or ten years.”
