More than half (53%) of borrowers were considering two-year fixed-rate options in November, according to new figures from Moneyfactscompare.co.uk.
70% of first-time buyers preferred the shorter-term deal, despite higher overall rates, while 62% of remortgage customers were considering a 2-year deal. However, among second-time buyers 45% were leaning toward five-year or longer terms and 7% of borrowers were exploring 10-year fixed deals.
Adam French, head of news at Moneyfactscompare.co.uk, says: “It’s not surprising that so many borrowers are considering two-year deals, given expectations for rates to continue falling in the short to medium term.”
“At the beginning of the year, the average two-year fixed mortgage rate was 5.48%, higher than the typical five-year deal, which was priced at 5.25%. However, two-year deals have since become cheaper, with average rates now at 4.86% and the average five-year deal sat at 4.91%, both dipping below 5% earlier this year for the first time since the mini budget in September 2022.”
“Despite this, second-time buyers appear to be prioritising stability, predictability, and protection from potential rate volatility over cheaper rates. They seem to be more concerned with securing long-term peace of mind, especially if they have higher levels of borrowing and want to shield themselves from unexpected rate hikes.”
Figures shaped by interest rate uncertainty
Mary-Lou Press, president of NAEA Propertymark (National Association of Estate Agents), says thefigures indicate that consumer confidence is still being shaped by uncertainty around the direction of interest rates.
“The strong shift towards two-year fixed products reflects a desire among many borrowers, particularly first-time buyers and those remortgaging, to keep their options open should rates continue to ease next year,” she says.
“While short-term fixes are attractive in the current climate, it’s notable that a significant share of second-time buyers are opting for longer-term stability. This aligns with what our member agents are hearing on the ground: homeowners with larger loans or growing families are prioritising predictability in their monthly payments, even if that means accepting a slightly higher rate. “Ultimately, borrowers are trying to strike the right balance between flexibility and security. With pricing between two and five-year deals now closer than earlier in the year, professional advice is more important than ever.”
