Editor's note: This brief was summarised by The Property AI Newsroom from a report by The Negotiator. Read the original article for full details.

Propertymark Issues Warning Over Short-Term Fixed-Rate Mortgages

Propertymark has issued a warning to property buyers about the risks of opting for short-term fixed-rate mortgages. The warning comes as new data from Moneyfacts reveals a growing trend of borrowers choosing two-year fixed-rate deals.

According to Moneyfacts, the proportion of website users comparing two-year fixed-rate mortgages increased from 48.4% in February to 55.6% in May. In contrast, demand for five-year fixed-rate deals fell from 27.7% to 21.8%, and searches for 10-year fixed-rate mortgages dropped from 6.5% to 4.5% over the same period.

Despite the average five-year fixed mortgage rate being lower than the average two-year fixed rate in May—5.68% compared to 5.78%—demand has continued to shift towards shorter-term deals. Moneyfacts suggests that more borrowers are willing to take a calculated risk, hoping to refinance at lower rates in the near future rather than locking in the lowest available rate today.

Mary-Lou Press, President at NAEA Propertymark, noted that buyers are placing greater emphasis on flexibility rather than simply securing the lowest rate. She highlighted that many borrowers are aware their circumstances may change in the coming years, such as moving home or reviewing their borrowing position, and that shorter-term fixes can provide more options. However, she cautioned that borrowers should avoid making decisions based solely on rate forecasts.

Adam French, Head of Consumer Finance at Moneyfacts, stated that many borrowers believe the recent spike in mortgage rates will be temporary and are willing to pay a small premium for a shorter fix, expecting to refinance onto a more competitive deal in the future. He also noted the continued decline in demand for 10-year fixes, indicating reluctance among borrowers to commit to current rates for the long term.

This trend is relevant for UK letting agents and inventory clerks, as shifting mortgage preferences may influence buyer behaviour and the wider property market.