Why 2/3yr deals more expensive than 5yr?

muffinek

I will be remortgaging soon and just checked my current lender Nationwide what they offer. They offered 2 or 3 year fixed deal at 4.04% with 65%ltv but 5year fixed deal is only 3.69%  When I was doing remortgage last time longer deals been bit more expensive. What am I missing here?

london21

Think the banks are encouraging people to pick longer terms.

All depends on your circumstances.

Personally will select 5 years for the certainty.

kingstreet

The money market where the rate swaps used to finance fixed rates are created sees longer-term interest rates at lower levels than those applicable in the short-term.

Edi81

Here’s some swap rates just now:
1yr - 3.8%

2 yr - 4.0%

3yr - 3.8%

5yr - 3.5%

10 yr - 3.1%

Pricing today will drive mortgage rates on offer in the weeks to come. 2 yr is going to be more expensive for a while yet. 

norsefox

The consideration would be that interest rates in the short-term are likely to be higher than those in the longer-term.

The logic would be that current interest rates are increasing in an attempt to reduce inflation.  With energy prices, and higher interest rates, a recession or significant downturn are likely, if not inevitable

To recover from such an eventuality (and presumably with inflation under control), interest rates might well be lowered to increase consumer and business spending - hence the current outlook.

muffinek

Are the swap rates what is predicted % BoE rates or banks expected rates? Based on current deals on offer tracker mortgages seem to be working out significantly cheaper than fixed deals although I fully appreciate the rates still will be going up for a while. 

Edi81

Swaps are quoted vs SONIA (an overnight rate). This moves in line with BOE and is approx 7bp or 0.07% lower than BOE. 

muffinek

Is there a good website I can see swap rates. I googled it and got multiple hits but none match figures in your previous post. 

Edi81

Swap rates move all the time when the markets are open. The rates I gave are rounded versions of what I could see at work and were to show that 5yr swaps are less than 2yr. 

Market data needs to be paid for which is why it is difficult to get live time information easily online.