5 year fixed rate mortgages hit their lowest level of 2019

At the beginning of January this year, the average 5 year fixed rate was 2.935%, which so far, is the highest it’s been this year. In July the rate decreased down to 2.852% and it currently sits at 2.794% (as at 15/08/2019, Moneyfacts).

This downward slide can also be seen in the 2 year fixed rate market; in the past month, the average rates have slid from 2.494% to 2.472%. Whilst not as severe a decline compared to 5 year rates, and by no means the lowest they’ve been this year to date, it is an interesting development for the market.

The decline in rates comes as SWAP rates for longer-term mortgages fall to below that of the 2 year terms, which some are suggesting could indicate yet further decreases in mortgage interest rates.

Last week, data from financial market data service ICE, showed that 2 year SWAP rates were 0.664, while 3 years were 0.624, 4 years 0.607 and 5 years 0.596. Interestingly, 10 year rates were cheaper than those of 2 years, at 0.627, which could explain why some lenders are launching more 10 - and even 15 - year products.

The markets have already factored in a possible cut in Base Rate due to the ongoing Brexit uncertainty – hence the fall in SWAP rates. The market is also predicting little in the way of rate increases in the long term. I have never seen the longer-term SWAP rates so low, so it is not a surprise that lenders will now be competing in the 10 and even 15 year fixed rate markets to attract long term borrowers. Of course, this is great news for borrowers!” – Steve Olejnik, Managing Director

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