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5 year fixes

ended 22. November 2022

The average five-year fixed mortgage rate has dropped below 6% for the first time in seven weeks, according to analysis. Mortgage lenders are offering 5.95% on average for a five-year fixed-rate deal, Moneyfacts.co.uk found. Few Qs:

  • Do you expect 5-year (and even two-year) fixes to come down more in the weeks ahead?
  • Where do you think the base rate is going to settle longer term? And based on this, what do you think an average fixed rate will be in 18 months to 2 year's time?
  • Any lenders cutting more aggressively than others to meet new lending targets? If so, which?

Any other thoughts, jot them down. This story is BREAKING so a tight deadline.

10 responses from the Newspage community

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Justin Moy
Managing Director at EHF Mortgages
We expect to see some further improvement in both 2 and 5 year fixed rates over the coming weeks, given the continued improvements within the money markets, plus the realisation that mortgage lenders only make money by lending - and if that has been way off normal volumes the last two months, then some margin cutting will also be needed to stimulate activity. Even on reduced margins, mortgage lending is profitable and activity creates activity. When rates increase, mortgage holders will hold off making a decision on what they need to do with their new or existing mortgage, and as rates slowly slip back to some form of normality, again they will hold out for a better rate and not commit. So lenders will need to bring stability and a good price to the market, which we have started to see in the last few days. The base rate will need to settle around the 2-3% range as a longer-term strategy. We know it will need to increase in the next six months or so, and then fall back as inflation improves and any recession kicks in. But as healthy long-term pricing, that would feel about right. Fixed rates of around 3-4% would be expected as a result. I sense we will see a few lenders start to aggressively price as the lending for 2022 is signed off, and targets for 2023 are set by each lender. I would expect to see high-street lenders in particular look for low loan-to-value business, typically below 60% LTV and remortgages, and build from that. We may see more of a mix of product types, with more tracker and discounted deals too.
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Aaron Strutt
Product and Communications Director at Trinity Financial
There is a selection of lenders offering sub 5% five-year fixes at the moment and clearly these are much more attractive than the rates on offer a few weeks ago. While a five-year fix at 5% isn't bad, it is still hugely more expensive than the deals we've been used to. The cost of funding has come down and we are expecting cheaper fixed rates over the coming months. If the property market continues to slow the lenders normally act and this is typically in the form of cheaper rates and more relaxed acceptance criteria.
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Dariusz Karpowicz
Director at Albion Financial Advice
Do you expect 5-year (and even two-year) fixes to come down more in the weeks ahead? I would imagine 5-year fixed deals to keep coming down in the next few weeks, mortgage lenders increased fixed prices a lot higher than swap rates and BOE base rate most probably anticipating even higher BOE rate. So they might decrease but will not get close to previous rates of about 2-3%. Where do you think the base rate is going to settle longer term? And based on this, what do you think an average fixed rate will be in 18 months to 2 year's time? I think that base rate might get close to 5% in the next 18 months, average fixed rates could be anything between 4.5% and 6.5%.
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Paul Holland
Mortgage Broker at Henchurch Lane Financial Services
Following last week's Autumn Statement, we expect swap rates, which predominantly influence fixed rates, to come down over the coming weeks. I believe fixed rates will be closer to 5% come Christmas and New Year. The Bank of England will be aiming for their base rate to be somewhere in the 2-3% range long term. This would result in cheaper fixed rates, likely somewhere in the 3-4% bracket. I imagine this will take 18 months to two years to achieve, once we go through a period of austerity and inflation is brought under control. We've seen several positive rate reductions over the past week with lenders like Skipton, Halifax and Accord being at the top of the competitive list for fixed rates. Lenders are still reluctant to price too keenly as it would result in an onslaught of applications they'll struggle to service as lots of people have held off selecting a lender for their mortgage intentions throughout October and November.
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James Myatt
Mortgage Broker at Embrace Financial Services
I expect fixed rate deals to continue to edge down slightly as 2022 draws to a close, as lenders look to hit end-of-year targets and service levels return to normality. I am finding the majority of borrowers are leaning towards two-year products (either fixed rates or trackers) with the hope and expectation that the current spike in inflation and interest rates will last 12-18 months, after which they will be in a position to negotiate more favourable terms in 2024/25 when their deals are up. Long term, or at least from 2024 onwards, I expect the Bank of England base rate to stabilise around 2% and expect this to lead to fixed rates returning to between 3% and 4%.
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Paul Neal
Mortgages & Equity Release Advisor at First Choice Financial Services
It's great to see rates begin to trickle down, and hopefully this will be an ongoing trend with markets begging to settle. Swap rates have been gradually dropping for the past six weeks. We should get back to 4% in the not-too-distant future, which is still a decent rate. The issue is we have been spoilt with incredibly low rates for so long that anything above 3% seems high.
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Natalie Hines
Founder at Premier One Mortgages
We’re already starting to see 5- and 2-year fixed rates coming down and I'm sure we will see other lenders follow suit. We can expect to see further rises in the base rate, but it will settle somewhere between 3% and 4%. With swap rates now stabilising, the average fixed rate in 18 months' time is likely to be where we currently are in the market.
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Hannah Bashford
Director at Model Financial Solutions
Fixed rates have been slowly coming down for the past few weeks with some lenders making weekly adjustments. We will likely see fixed rates around the 4%-5% mark over the next 12 months and for the base rate to increase in the first half of next year but eventually settling around 3%-4%. I’d like to see rates settle to a more stable level of 3%-4% long term as this is manageable for most people and more realistic. I still wouldn’t like to put someone on a 5-year fixed rate over 5% as I think we will see rates come down.
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Jonathan Burridge
Founding Adviser at We Are Money
Swap rates have cooled and, depending on which fortune-teller you choose to follow, 5-year Swaps could be 3% by the end of the first quarter of 2023. We are seeing the market act more conventionally again so this reduction is not unexpected. There is scope to see rates drop further provided nothing unexpected occurs.
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Matthew Jackson
Director at Mint FS
It feels like much of the turbulence in the mortgage markets has passed, and although pricing has been drastically impacted, we are beginning to see a softening of prices and the market finding its natural level. Most forecasts now expect the Bank of England base rate to peak at or below 4% and hold there for a period of time. Swap rates are continuing to fall and I would expect to see 5-year fixes settle at between 4% and 5% depending on the loan to value. Long term, one of the side effects of the mini-Budget and increases in the base rate will be a switch of pricing, whereby 5-year rates are priced more keenly than 2-year fixed rates as lenders return to pricing by risk.