Average Two-Year Mortgage Fixes Fall Below 5%

Adapted from an article in our August Newsletter

Homeowners coming to the end of a fixed mortgage deal are finally getting some good news. For the first time in nearly three years, the average two-year fixed mortgage rate has slipped below five per cent.

According to industry data, the average two-year fix now stands at 4.99 per cent, compared with 5 per cent for a typical five-year deal. It marks a dramatic turnaround from the turbulence of recent years, when rates spiked above six per cent in the aftermath of Liz Truss’s 2022 mini-Budget and again during the inflation surge of 2023.

For borrowers, the impact is clear. Someone remortgaging a £200,000 loan over 25 years could now be looking at monthly payments of around £1,167 – hundreds less than the sums being quoted at last year’s peak.

Why Rates Are Finally Falling

The Bank of England’s decision to cut the base rate to 4.0 per cent earlier this month has helped to ease borrowing costs. At the same time, competition among lenders has intensified, with many banks lowering rates to attract remortgage business after a quieter start to the year.

The result is that deals once thought unthinkable are now back on the table. Borrowers with strong equity are seeing two-year fixed rates well below four per cent. For example, Santander is offering a 3.78 per cent two-year fix for homeowners with at least 40 per cent equity. Buyers with a 15 per cent deposit can secure a 3.94 per cent two-year fix from Yorkshire Building Society.

What This Means for You

If your current deal is ending soon, the market looks far more positive than it did a year ago. Rates remain higher than the record lows of the late 2010s, but they have fallen steadily from the 2023 highs.

Choosing the right deal is about more than the headline number, however. Borrowers must weigh up:

Two-year fixes: greater flexibility if rates keep falling, but you may face arrangement fees again sooner.

Five-year fixes: longer security against future rises, though you might miss out if rates continue to drop.

Three-year fixes: increasingly available, striking a balance between short-term freedom and medium-term certainty.

Trackers: these follow the Bank of England’s base rate plus a margin and can offer flexibility, but repayments could rise again if rates move upwards.

A Moment of Opportunity

The mortgage market has been through a period of volatility, but the signs now point towards greater stability and more competitive pricing. For many families, this represents an opportunity to reduce monthly costs and plan with more confidence.

If your fixed rate is due to end within the next six months, now is the right time to review your options. Speak to Russell Green, and he can help you understand how the latest changes in the mortgage market could affect your repayments.

How to Contact Us

Tel 01934 442023

Email russell@swmortgages.com

Complete a form via our website www.westonmortgagesonline.com

Our initial mortgage consultation is free and with no obligation; should you proceed to an application, there will usually be a fee for mortgage advice. The precise amount of the fee will depend upon your circumstances, but will range from £ 290 to £490, and this will be discussed and agreed with you at the earliest opportunity.

Please remember: YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE

Sources

Yahoo Finance (2025). Average two-year mortgage rate dips below 5% for first time since mini-budget. Available at: https://uk.finance.yahoo.com/news/average-two-mortgage-rate-dips-100452702.html         [Accessed 20 Aug. 2025].

Bank of England (2025). Bank Rate reduced to 4% – August 2025. Available at: https://www.bankofengland.co.uk/monetary-policy-summary-and-minutes/2025/august-2025                 [Accessed 20 Aug. 2025].

MSN.com. (2025). Two-year fixed mortgage rates hit lowest level since Liz Truss’s 2022 mini-BudgetAvailable at: https://www.msn.com/en-au/money/news/two-year-fixed-mortgage-rates-hit-lowest-level-since-liz-truss-s-2022-mini-budget/ar-AA1KK17M?ocid=socialshare [Accessed 20 Aug. 2025].

All the information in this article is correct as of the publish date 28th August 2025. The opinions expressed in this publication are those of the authors. The information provided in this article, including text, graphics and images does not, and is not intended to, substitute advice; instead, all information, content, and materials available in this article are for general informational purposes only. Information in this article may not constitute the most up-to-date legal or other information.

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