The difference between the average two-year and five-year fixed rate mortgage is at one of the lowest levels seen in over a decade, according to new research from comparethemarket.
According to the latest Bank of England data, the average two-year fixed mortgage rate is now at 1.40% and a five-year fixed mortgage rate at 1.69% – a difference of 0.28%. In contrast, the average SVR today is 3.66%.
While the lowest point recorded in the last ten years was 0.25% in Q4 2019, the difference has not been seen lower than this since 2008 at -0.03%.
Based on the average mortgage debt of £135,000 and a 75% loan to value (LTV), homeowners on a standard variable rate mortgage could be paying nearly £2,000 a year more in comparison to those on the average two-year fixed rate. This is almost £1,700 extra compared to a five-year fix and over £1,000 more compared to the average 10-year fix rate.
There are approximately 800,000 borrowers who have been on a standard variable rate for more than six months.
Mark Gordon, director of money at comparethemarket said, “Considering the current economic environment and historically low interest rates, knowing what your monthly interest payments are over the long term can provide greater certainty and peace of mind, making it easier to manage everyday finances.
“Staying on a lender’s standard variable rate mortgage can cost thousands of pounds more than is necessary. By re-mortgaging, this money can be used elsewhere or put into a rainy-day savings fund.”