Average mortgage rates on two and five-year fixed products have fallen this month to 5.48% and 5.25% respectively, new data from Moneyfacts has shown.

These represented falls of 0.04% on the average two-year fix, and 0.03% for an average five-year fix.

At the start of January last year, the average five-year fixed rate was 5.55%, 0.3% higher than its current level. However, the average two-year fixed rate has dropped by 0.45% over the same period, down from 5.93%.

Moneyafcts also reported that product choice overall climbed month-on-month, to 6,508 options. Product numbers across the market are currently substantially higher than a year ago, when they sat at 5,899 options.

Finance expert at Moneyfacts, Rachel Springall, said that borrowers who prefer to lock into a shorter-term mortgage would be “pleased” to see that the rate gap between the average two-and five-year fixed mortgage has dropped to its lowest margin in two years (January 2023).

“It remains the case that the average five-year mortgage rate is lower than its two-year counterpart, which may be more enticing for those who want peace of mind for longer when it comes to their monthly mortgage repayments,” Springall added.

“There was a mix of rises and falls during 2024 and it will be hard to predict where interest rates might go this year, particularly should stubborn inflation persist.

“However, there were big expectations for fixed mortgage rates to fall, but this could take longer should the markets be unsettled and if swap rates start to rise. Lenders may be cautious in their rate setting but they need to make efforts to entice new business and act quickly if there is volatility on future rate expectations. There are millions of borrowers due to come off fixed deals, so remortgage activity will be booming in 2025.”

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