There has been a price turnaround in the mortgage market as two-year fixed rates become cheaper than five-year deals for the first time in three years.
Since September 2022 the average rate on a two-year fixed rate mortgage has been higher than the typical five-year fixed rate.
This is because, with interest rates high, many borrowers prefer to fix their rate for a shorter period of time in case rates fall again and they can take advantage of lower prices. Fixing at a higher rate for five years may feel like a big undertaking and, for this reason, mortgage lenders have been pricing these five-year deals lower and two-year deals have been more expensive.
But as interest rates have been falling in the last year, the five-year fix has been looking more attractive and this has been apparent in the price.
According to new data out today from Moneyfactscompare.co.uk, the average two-year fixed rate this time last year was 5.77% and the five year average was 5.38%. Fast forward to August 2025 and it’s 5% for two-year fix and 5.01% for a five-year mortgage.
| Mortgage market analysis | |||||
| Average mortgage rates | Sep-22 | Aug-23 | Aug-24 | Jul-25 | Today |
| Two-year fixed mortgage | 4.24% | 6.85% | 5.77% | 5.09% | 5.00% |
| Five-year fixed mortgage | 4.33% | 6.37% | 5.38% | 5.08% | 5.01% |
| Average rates shown are as at the first available day of the month, unless stated otherwise. Source: Moneyfactscompare.co.uk | |||||
Rachel Springall, finance expert at Moneyfactscompare.co.uk, said: “Millions of borrowers coming off a fixed rate deal this year will be delighted to see fixed mortgage rates on the downward trend, with the average two-year fixed rate dipping below its five-year counterpart for the first time since September 2022.
“Back then, mortgage rates started to rise dramatically, in the aftermath of the ‘mini-Budget’ and it caused mass panic for those struggling to buy their first home.
“Thankfully, time is a healer, with lower rates, much more market stability and a relaxation in stress testing, mortgage prisoners might now be free to refinance.”
What does the new pricing mean for borrowers?
Springall explained this change-around in pricing is a sign things are returning to something a little closer to normal.
“The end of the inversion in the two- and five-year fixed rates, if sustained moving onward, will bring borrowers back to a more traditional mortgage market, where it’s more expensive to secure a longer-term fixed mortgage,” Springall explained.
“Lenders will no doubt be keeping a close eye on swap rates and react quickly should the path change in the coming weeks. This may well be the time for borrowers to act quickly to secure a deal, so it’s wise for them to seek advice to navigate the mortgage maze.”
