Shifting Tides in UK Mortgage Remortgaging: Two-Year Fixes Gain Popularity
Mortgage agreement nearing its end? Brokers disclose strategies for those facing increased payments
The UK mortgage market has witnessed a notable transformation, particularly in the realm of remortgaging. A growing preference for two-year fixes over five-year deals is becoming increasingly evident.
A Changing Landscape: Rate Dynamics and Remortgaging Activity
As of early August 2025, the average two-year fixed mortgage rate has dropped below the five-year fixed rate for the first time since September 2022[2]. This reversal is a result of market stabilisation and the Bank of England's base rate reduction[3]. Consequently, there has been a surge in remortgage enquiries from borrowers whose fixed rates are due to expire in late 2025 and into 2026[1].
Borrowers are increasingly opting for shorter-term fixes, such as two-year deals, in anticipation of further rate reductions[4]. This preference reflects a desire for certainty while leaving room to adjust to potential future rate changes[4].
Economic and Market Factors
The Bank of England's base rate reduction to 4.00% on August 7, 2025, combined with the market's anticipation of further cuts, suggests a downward trend in mortgage rates[3]. However, stubbornly high inflation is expected to slow the pace of mortgage rate reductions, as the Bank of England is cautious about cutting rates too aggressively[5].
Real-Life Impact: Mortgage Payments and Household Finances
For homeowners like Roque Way, a technical director for an IT company, the current remortgaging landscape presents challenges. Facing a significant increase in monthly payments due to higher interest rates, Way is trying to remortgage but must cut expenses, such as his gym subscription, to afford the higher payments[6].
On the other hand, some clients of Aaron Strutt's, a mortgage broker, are remortgaging to gift a deposit to their adult children to help them get on the property ladder[7].
Strategies for Adaptation
Some borrowers, such as Nichola Jomoa's clients at Mortgage Advice Bureau, are increasing the term of their mortgage to cope with higher rates[8]. Lenders offer product transfers, which require less paperwork, no new affordability assessment, and no re-valuation of the property, giving households coming to the end of a fixed-rate mortgage the option to switch to a new deal instead of automatically being moved onto their lender's more expensive standard variable rate[9].
By lengthening the term of a mortgage, a borrower spreads their repayments over a longer period of time and therefore reduces the monthly costs[10]. However, it will mean paying interest for a longer period of time and therefore paying more in the long run.
Market Trends: Lender Preferences and Loan-to-Value Ratios
Santander's mortgage lending figures suggest a preference for shorter-term fixed rate deals, with 54% of customers opting for two-year fixes compared to 36% opting for five-year deals[3]. Lenders will have different rates at varying loan-to-value levels, and someone at 60% loan-to-value could pay substantially less than someone at 90% loan-to-value[11].
Looking Ahead
An estimated 900,000 households in the UK will reach the end of their fixed mortgage deals between July and the end of December this year[12]. As the market continues to evolve, it is crucial for homeowners to stay informed and seek professional advice to make the best decisions regarding their mortgages.
[1] The Telegraph [2] Moneyfacts [3] Bank of England [4] Financial Times [5] Reuters [6] The Guardian [7] The Times [8] The Sun [9] This is Money [10] The Mirror [11] Zoopla [12] The Times
- With the average two-year fixed mortgage rate dropping below the five-year fixed rate, many homeowners are showing interest in remortgaging with shorter-term deals like two-year fixes as a strategy for financial security and flexibility in the face of potential future rate changes, falling under the umbrella of personal-finance decisions.
- In the current remortgaging landscape, some homeowners like Roque Way are finding it challenging to cope with increased mortgage payments due to rising interest rates, prompting them to cut expenses in their personal-finance budgets, while others, such as Aaron Strutt's clients, are utilizing remortgaging as a means to provide financial assistance for their adult children to purchase property.
