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Lenders slice rates on 5-year mortgages as popularity of longer term deals soars 


Lenders slice rates on 5-year mortgages as popularity of longer term deals soars

  • There are now more five-year deals at lower LTVs than there are two year fixes
  • Five year fixed rates remain low as more borrowers look to lock in for longer
  • The cheapest five-year fix currently stands at just 1.39 per cent 

Borrowers looking to fix their mortgage for five years have more choice than ever before, research has revealed.

The number of five-year fixes on offer for those with a bigger deposit is now greater than the number of two-year deals, which have traditionally been the most popular mortgage-type, according to experts at Moneyfacts. 

Rates have also been pushed to near-record lows as lenders continue to cut prices in the face of increased consumer demand.   

The research found that borrowers who can raise a 25 per cent deposit or greater have 610 five-year fixed rate mortgage deals available to choose from, 18 more than the number of two-year fixed rate deals.

Greater competition has forced lenders to cut rates on their five-year fixed rate deals

Greater competition has forced lenders to cut rates on their five-year fixed rate deals 

By comparison, five years ago, the number of two-year fixed rate deals available outnumbered five-year deals by 148 and a year ago there were 17 more two-year products to choose from.

The total number of five-year fixed rate deals now stands at 1,473, compared to just 941 five years ago. 

There has been a rise in the popularity of longer-term deals in recent months as a combination of economic uncertainty and cheap rates have tempted borrowers into fixing for longer.

That’s not the only factor at play. What are known as ‘swap’ rates, the rates used by many lenders to price their fixed-rate deals, have been consistently low for some time, with five-year money being cheaper than two year money at one stage.

Five-year fixed rate product availability 
50% LTV 60% LTV 65% LTV 70% LTV 75% LTV All LTVs 
Jan-15 11 110 51 77 156 941
Jan-19 13 180 28 91 274 1,425
Jan-20 19 196 29 89 277 1,473

This has allowed lenders to offer some of the cheapest ever five-year mortgages. 

Darren Cook, finance expert at Moneyfacts, said: ‘Intense competition among mortgage providers seems to have resulted in the two-year fixed rate market becoming saturated, margins becoming squeezed and mortgage providers looking to entice borrowers to consider a longer five-year fixed rate deal as an alternative. 

‘Healthy competition within the five-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. 

‘Historically, borrowers seemed to have preferred the short-term commitment of a two-year fixed rate deal, but now that product availability has significantly increased in the longer-term five-year mortgage market, borrowers may be looking beyond interest rates and more towards the stability of setting monthly mortgage repayments.’ 

The cheapest five-year fixed rates 

The cheapest decade-long deal is currently with Santander, which offers a five-year fix up to 60 per cent loan-to-value at 1.39 per cent with a £1,548 fee.

On a £200,000 mortgage taken over 25 years this deal would result in monthly repayments of £760.

First Direct offers a similar deal at 1.49 per cent with a £490 fee, but up to 60 per cent loan-to-value.

On the example given above, First Direct’s offering would result in monthly repayments of £799. 

Should I lock in for longer?

Locking in your mortgage payments helps provide certainty, but at the cost of the flexibility a shorter-term fixed rate would offer. 

If you need to pay back your mortgage sooner, or get a different loan to borrow more or move house before the end of the term, there are usually expensive early repayment charges to pay. 

Some deals may allow you to leave after a set period of time without paying any charges, however.

Leeds Building Society recently launched a five-year fix with no early repayment charges

It means borrowers can lock into a fixed rate for up to half a decade without having to pay a penalty if they repay early – a rare opportunity to achieve the certainty of a fixed deal and the flexibility of unlimited over payment.    

You can keep up to date with the latest and best mortgage deals by following our regularly updated mortgage rates guide found here.

And you can find all the best deals for yourself with This is Money and partner L&C’s mortgage finder tool by clicking here.     





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