11 / 04 / 2022
Five and 10-year fixed mortgages are being offered at cheaper rates than two-year fixes at one major lender, as people seek to lock in monthly payments for as long as possible due to the cost of living crisis.
Halifax has today launched a two-year fixed rate of 2.54 per cent with a £995 fee, for those with deposits of 40 per cent or more.
But the comparable five and ten-year fixed rates are cheaper at 2.48 per cent – marking a potential turning point in the mortgage market.
The fee-free options have an even wider rate gap, priced at 2.94 per cent for a two-year fix and 2.82 per cent for a five-year.
Customers traditionally pay a premium for longer terms, as they get the benefit of securing their rate at the same level for longer.
And until recently two-year fixes were much more popular, meaning that banks could charge cheaper rates on them to attract customers.
But the rising cost of living crisis has seen borrowers flock to five-year fixes as they seek the certainty of locking in their monthly payments for five years – meaning banks can potentially attract lots of customers by pricing these competitively.
Experts say lenders are also worried about the impact of the cost of living crisis on their customers’ ability to pay their mortgages – meaning that they are keen on fixing rates for longer, too.
Ashley Thomas, director at broker Magni Finance, said: ‘I wouldn’t be surprised to see more follow Halifax and price lower than a two year.
‘We have seen a large increase in people enquiring for seven or ten year fixed rates as the price difference can be as low as 0.05 per cent.
‘This is worth considering if you are living in your dream home and have no plans to move for a long time.’
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