You are here: Home - Mortgages - Remortgage - News -

Difference between two and five-year mortgage fix at decade low

0
Written by:
10/09/2020
The difference between the average two and five-year mortgage deal stands at just 0.28% - the lowest level seen since 2008.

The average two-year fixed rate stands at 1.40% while the five-year rate comes in at 1.69% (figures rounded). This means the difference between a shorter and a longer mortgage fix is just 0.28%.

This is the lowest level seen since 2008, according to research by comparison site comparethemarket.com.

It added that while the lowest point recorded in the last ten years was 0.25% in late 2019, the difference hasn’t been seen lower than this since 2008 at -0.03%.

Given that there are around 800,000 borrowers who have been on their lender’s standard variable rate (SVR) for six months or more, averaging 3.66% today, mortgage holders could save thousands of pounds fixing their rate.

Although fixing for longer means higher interest rates, Comparethemarket estimated switching from a SVR to a five-year fix could reduce monthly payments by nearly £150 per month.

It also gives billpayers certainty of how much they’ll be paying each month and means they can lock in lower rates for a longer period of time. But switchers are urged to check fees before making the move.

Based on the average mortgage debt of £135,000 and a 75% loan-to-value, homeowners on a standard variable rate mortgage (SVR) could be paying nearly £2,000 a year more in comparison to those on the average two-year fixed mortgage deal. This is almost £1,700 extra compared to a five-year fix and over £1,000 more compared to the average 10-year fix rate.

The table below outlines the possible savings, but excludes additional fees:

Mark Gordon, director of money at comparethemarket.com, said: “The longer you fix, the longer you are locked into a lower monthly payment. Considering the current economic environment and historically low interest rates, knowing what your monthly interest payments are over the long-term can provide greater certainty and peace of mind, making it easier to manage everyday finances.

“Staying on a lender’s standard variable rate mortgage can cost thousands of pounds more than is necessary. By re-mortgaging, this money can be used elsewhere or put into a rainy-day savings fund. While there are fewer mortgage products available on market than usual, there are still plenty of good deals to be found by shopping around online and comparing deals.”

There are 0 Comment(s)

If you wish to comment without signing in, click your cursor in the top box and tick the 'Sign in as a guest' box at the bottom.

Autumn Statement: Everything you need to know at a glance

Yesterday Chancellor Jeremy Hunt made his first fiscal statement in the role, outlining a range of tax measure...

End of Help to Buy: 10 alternatives for first-time buyers

The deadline for Help to Buy Equity Loan applications passed on 31 October. If you’re a first-time buyer who...

Moving to an energy prepayment meter: Everything you need to know

As households struggle with the soaring cost of energy, tens of thousands of billpayers are expected to move o...

What will happen if rates change

How your finances will be impacted by a rise in interest rates.

Regular Savings Calculator

Small regular contributions can build up nicely over time.

Online Savings Calculator

Work out how your online savings can build over time.

DIY investors: 10 common mistakes to avoid

For those without the help and experience of an adviser, here are 10 common DIY investor mistakes to avoid.

Mortgage down-valuations: Tips to avoid pulling out of a house sale

Down-valuations are on the rise. So, what does it mean for home buyers, and what can you do?

Five tips for surviving a bear market mauling

The S&P 500 has slipped into bear market territory and for UK investors, the FTSE 250 is also on the edge. Her...

Money Tips of the Week