Mail Online mortgage story

ended 11. April 2022

A journalist at the Mail Online is working on a mortgage piece today about the Halifax launching a five-year fixed rate that's cheaper than a two-year fixed rate (2.48% and 2.54% respectively, based on a 40% deposit). She's keen to find out if any other lenders are doing this, and ask whether this could be a long-term reversal with more people wanting to lock in their payments for longer. And any advice/words of warning for people looking to remortgage from a 2yr to a 5yr fix. Deadline is 2pm.


6 responses from the Newspage community

"Currently, lenders are repricing deals on an almost daily basis. It's not the first time a 5-year deal has been cheaper than its 2-year counterpart. It's important to understand why this is. Fixed rates are based on what happens with SONIA (the Sterling Overnight Index Average), an important interest rate benchmark, and swap markets. They aren't correlated to the base rate. As money markets are unsure of the short-term repercussions of the war in Ukraine and its impact on everything, from gas prices to the cost of wheat, coupled with high inflation and shrinking economic growth, it leads to a lot of uncertainty. This contrasts with five and 10-year money, where clearly the money markets are better able to assess the longer-term impacts of the current volatility and why those deals are priced as they are. In reality, there's no point in consumers worrying about this. The best bet is to talk to an independent broker and get the right advice. People should never try to either predict or second-guess the market. Deal with the here and now. As we've seen with the Russian aggression in Ukraine, the future isn't certain."
"If the circumstances are suitable for a client's short- to medium-term plans, I am a big fan of a five-year fixed rate deal. It is great to see lenders considering the market, their clients' futures and the current cost of living. It is frustrating when a client wants the lowest rate possible and that is always a two-year deal, but once I explain to them that we will be reviewing this again in 18 months time, which could be at a potentially higher interest rate (subject to the rise and fall of interest rates in the future), usually a five-year fixed rate deal is the better option to have that medium-term security. Great to see the Halifax moving with the times and bringing the change that is needed."
"There are a few lenders that currently price their two and five year fixed rate products exactly the same. However, I wouldn't be surprised to see more follow Halifax and price more fives 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%. This is worth considering if you are living in your dream home and have no plans to move for a long time."
"Longer term fixed mortgages are increasingly popular with rates still very low by historical standards. But it's unusual to see cheaper rates on the 5-year fixes. It just shows where the competition is these days amongst lenders. Early repayment charges are the thing to look out for, as they apply for the entire fixed rate period, sometimes longer, if the lender has an overhang period. The general rule of thumb is to fix for as long as you reasonably think you'll be living at the property. I suspect lenders have run the numbers and worked out they can afford cheaper 5-year fixes thanks to the extra early repayment charges some borrowers end up paying when they move during the fixed rate period."
"Longer term fixed rates have been growing in popularity and in the current climate they would be a safe bet, subject to a borrower's circumstances. Looking at the current pricing of Halifax, both 2 and 5 year fixed rates are quite some way behind the pack for 60% LTV borrowing and other loan to value thresholds. Halifax do use product pricing to drive volumes and I expect that they are deliberately priced to gain more five year borrowers at present, although overall they appear to be taking their foot off the gas for new borrowers and this will change as their appetite changes. There is not one "right" answer in terms of which product term to opt for, it is entirely dependent upon the borrower's circumstances, needs and preferences. I would always recommend looking at the costs of the product over the scheme period, not just the headline rate."
"There is more than one lender now offering lower 5-year than 2-year fixed rates, including one private bank offering even lower 10-year fixed rates. It's a very unusual situation, one that reflects concerns over expected spikes in inflation and hikes in interest rates due to Covid, Brexit and War in Europe. Borrowers should be wary of locking into rates boosted by such extreme events. Various doomsday scenarios seem 'priced in' at this stage and the upward squeeze on mortgage rates seems likely to settle down."