Rising mortgage rates are prompting a shift in borrower behaviour, with demand for two-year fixed-rate products increasing significantly as borrowers seek flexibility during a period of market volatility, according to data from Moneyfactscompare.co.uk.
Analysis of mortgage searches over the 30 days to 2 April 2026, compared with the previous month, shows demand for two-year fixed deals rose by 13%, while interest in five-year fixes fell by 9%. The decline in longer-term fixes was particularly pronounced among homemovers and remortgage borrowers.
Variable rates gain ground
Variable-rate mortgages also recorded growth, with homemovers driving a 47% increase in searches, although these products still represent a smaller portion of overall market activity. The shift comes as two-year fixed rates increased by 99 basis points since early February, while five-year fixes rose by 81 basis points. Variable rates, by comparison, increased by just 28 basis points over the same period.
The data indicates that borrowers are responding to rate increases linked to geopolitical tensions by opting for shorter-term commitments. In March, two-year fixes accounted for 55% of total searches, up from 48% in February, while five-year fixes declined from 28% to 25%.
Market implications
Adam French, Head of Consumer Finance at Moneyfactscompare.co.uk, noted that the scale of rate rises has altered borrower preferences. “With five-year fixes jumping by more than 80 basis points, many are pivoting towards two-year deals in the hope that the rate spike being driven by the conflict in Iran proves short-lived,” he said.
The trend suggests some borrowers are anticipating that rates may fall sooner than current market expectations indicate. This strategy carries risk, particularly for those who may face higher rates when their fixed terms expire. The shift in borrower behaviour comes as property transactions continue to face delays, with one in five buyers experiencing completion times of six months or more.
Remortgage borrowers, many of whom are already facing payment increases, appear particularly reluctant to lock in elevated rates for extended periods. Among this group, searches for five-year fixes fell by 15%, while two-year fix searches increased by 11%.
Rate trajectory
Average two-year fixed rates stood at 5.84% on 1 April, up from 4.85% on 1 February. Five-year fixes reached 5.75%, compared with 4.94% two months earlier. Average two-year tracker rates rose from 4.41% to 4.69% over the same period.
The data excludes other mortgage terms and reflects users comparing multiple product types per session. First-time buyers showed a 20% increase in searches for two-year fixes, though they also recorded a 16% rise in five-year fix searches, suggesting this group remains more divided in their approach.
The changing mortgage landscape is affecting broader market dynamics, with buy-to-let landlords also facing pressure from higher borrowing costs, though exit rates remain modest. The current environment presents challenges for both owner-occupiers and investors as they navigate elevated interest rates and uncertain market conditions.
