The disparity between the average rates for two and five-year fixed-rate mortgages has narrowed, hitting a two-year low, reports financial website Moneyfacts.

As of January's start, the average rate for a two-year fixed mortgage stood at 5.48%, a mere 0.23 percentage points above the five-year fix, which averaged 5.25%. The gap between the two and five-year fixed-rate deals, noted as the smallest since January 2023 when the difference was just 0.16 percentage points, is based on data gathered on the initial day of each month.

Finance expert Rachel Springall from Moneyfacts commented: "Borrowers who prefer to lock into a shorter-term mortgage may be pleased to see that the rate gap between the average two and five-year fixed mortgage has dropped to its lowest margin in two years.

"However, it remains the case that the average five-year mortgage rate is lower than its two-year counterpart, which may be more enticing for those who want peace of mind for longer when it comes to their monthly mortgage repayments.

"There was a mix of rises and falls during 2024 and it will be hard to predict where interest rates might go this year, particularly should stubborn inflation persist."

She further noted that the average standard variable rate (SVR), which borrowers may end up on when their initial deal ends, was significantly higher than average two and five-year fixed rates, standing at 7.81%.