Five-year fixed rate mortgages have hit their lowest level of the year while two-year fixes have also dipped over the last month.

The falls have come as swap rates for longer terms are now less than for two years, and perhaps signal that further falls in mortgage interest rates could come.

Data from financial market data service Ice, which monitors the swap markets for lending rates between banks, revealed the unusual reversal in lending rates.

At the close of business yesterday, two-year swap rates were at 0.664, compared to 0.624 for three years, 0.607 for four years and 0.596 for five years.

Perhaps more surprising is that 10-year lending rates were also cheaper than their two-year counterparts at 0.627.

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This continued softening of swap rates may also explain why more longer-term mortgages of 10 or even 15 years are being launched.

Mortgage rates down

Moneyfacts revealed that this slide in swap rates had been reflected by falls in the average five-year fixed rate mortgage to its lowest level in 2019 at 2.794 per cent.

Just a month ago this was 2.852 per cent while on 1 January it was at 2.935 per cent – the highest mark of the calendar year so far.

The Moneyfacts data also showed the average two-year fixed rate had dipped over the last month from 2.494 per cent on 16 July, to 2.472 at the end of the week.

While this drop is notable, in contrast to five-year deals, two-year fixes were cheaper earlier in the year and this is not such a long-pronounced decline in rates.