UK Two-Year Fixed Mortgages Dip Below Five-Year Rates for First Time Since 2022
Posted on Sunday, 10 August, 2025
A significant shift occurred recently in the UK mortgage market: average two‑year fixed mortgage rates have fallen below five‑year rates, a scenario unseen since the post‑mini‑Budget upheaval of 2022 The Guardian+4Financial Times+4Moneyfacts Group+4.
What’s the Current Rate Landscape?
- Two-year fixed mortgages now average 5.00%.
- Five‑year fixed mortgages come in slightly higher, averaging 5.01% MoneyWeek+2MoneyWeek+2Moneyfacts Group.
Moneyfacts data shows this divergence is the first since September 2022, signaling a return to a more traditional mortgage pricing structure Moneyfactscompare+8Moneyfacts Group+8The Times+8.
Why This Matters
Under normal conditions, shorter-term mortgages cost less due to lower exposure to long-term rate risk. This recent inversion suggests markets expect near-term interest rate cuts, even though long-term rates are anticipated to hover around 4% Financial Times.
What Borrowers Should Know
- Borrowers nearing fixed-rate expiry may now find a two‑year fix more cost‑effective.
- Shorter-term deals could offer savings without locking in a longer rate—especially appealing if rate cuts are expected soon MoneyWeek+15Financial Times+15Moneyfacts Group+15The Guardian+1.
- Nonetheless, longer-term fixes still provide stability and peace of mind. It’s a trade-off between cost savings and security Financial TimesThe Times.
Broader Market Context
This development coincides with the Bank of England’s recent base rate cut to 4.0%, marking the fifth reduction in a year MoneyWeek. Falling swap rates and aggressive lender competition are further driving mortgages lower Moneyfacts Group+4MoneyWeek+4Rightmove+4.
Additionally, rate reductions are making borrowing more accessible for buyers and remortgagers, although buyers with variable-rate mortgages (which aren’t fixed) may benefit more immediately
Final Thoughts
This inversion—two-year fixed rates now lower than five-year ones—is a rare but telling shift, pointing to expectations of falling interest rates in the near future. If you’re remortgaging or purchasing soon, comparing both options with fees and flexibility in mind is more important than ever.
