Two-year fixed sees steepest drop since October, narrowing gap with five-year deals
UK mortgage rates are continuing their downward trend, with the average two-year fixed rate falling by its largest margin since October 2024, according to the latest Moneyfacts UK Mortgage Trends Treasury Report.
Data shows the average two-year fixed rate dropped by 0.14 percentage points to 5.18% in May, marking its sharpest fall since October 2024, when it fell by 0.16%. The five-year fixed rate also decreased, falling 0.08 percentage points to 5.10%.
Compared to early May 2024, the five-year fixed rate has declined by 0.38 percentage points from 5.48%. The two-year rate saw a larger drop, falling 0.73 percentage points from 5.91%. The current two-year fixed rate is now at its lowest level since September 2022, when it stood at 4.24%. Meanwhile, the five-year average rate is at its lowest since November 2024.
Although the two-year rate remains marginally higher than the five-year by 0.08 percentage points, the gap is now the smallest since fixed rate pricing flipped in October 2022.
Mortgage product shelf-life decreased to 19 days in May, down from 21 days the month before, highlighting increased lender activity in the market. At the same time, total product availability rose to 6,993, the highest since October 2007 and up from 6,565 a year earlier.
The average two-year tracker variable rate also moved down slightly to 5.16%, while the average standard variable rate (SVR) dropped to 7.58%. The peak SVR was 8.19% in late 2023.
“The momentum of rate cutting was rife throughout April, with lenders rushing to tweak their mortgage ranges, leading to a drop in the average shelf-life of a mortgage to 19 days, down from 21 a month prior,” said Rachel Springall (pictured), finance expert at Moneyfacts. “Such vigorous activity led to notable cuts to the overall average two- and five-year fixed mortgage rates, seeing the biggest monthly fall to the two-year fixed rate in over six months.”
Springall noted that falling swap rates have contributed to the recent downward pressure on fixed rates, adding that the narrowing spread between short- and long-term rates could signal a shift in market dynamics.
“The inversion in rates could soon come to an end, with the rate gap between the average two- and five-year fixed mortgages now just 0.08%,” she added. “Since the start of October 2022, the average two-year fixed rate has been higher than the five-year rate. However, borrowers who are worried about rate volatility in the months to come may still prefer a five-year fixed rate deal to secure their rate for longer, particularly as the overall average rate is at its lowest point for six months.”
Springall also highlighted improved conditions for borrowers with small deposits, with the average two-year fixed rate at 90% loan-to-value (LTV) falling to 5.33%, its lowest since October 2022. Product availability for high-LTV deals remains strong, reaching levels last seen in 2008.
“Product choice continues to thrive, and this can create a positive outlook among borrowers,” she said. “There will be millions of consumers coming off low fixed rate mortgages over the next year and they need both the support and appetite for new business from lenders to secure new deals. First-time buyers remain an integral part of the mortgage market, so any relief on stress testing or innovative products can make a huge difference to those struggling to find an affordable home.”
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