Martin Lewis issues urgent warning to UK homeowners who have two-year fixed mortgage

Martin Lewis gave a new warning to mortgage holders after the Bank of England voted to keep interest rates on hold at 5% - and shared important information about two-year fixes

Money-saving expert Martin Lewis has issued a new warning to mortgage holders in the UK.

He said all mortgage holders should consider fixing their rates and highlighted that contrary to popular belief, two-year fixes aren't as economical as five-year options. Speaking on his BBC Sounds podcast, the financial guru discussed the current state of the mortgage market with broker Monty. Mr Lewis explained: "Mortgage rates are finally dropping. The cheapest five-year fixes are easily limboing below 4%, while the cheapest two-year fixes are just scraping under 4%. And this is even though the Bank of England voted to keep interest rates on hold at 5% last week."

He went on to clarify the relationship between interest rates and mortgage types, saying: "And what people need to understand is, while the Bank of England UK base rate tends to dictate how variable rate mortgages, standard variable or tracker mortgages move, variable rate mortgage can also move for other reasons too, they move with the Bank of England base rate, fixed rates, the rate of a new fix, they tend to move with city swap rates, which to oversimplify to an extent, are the market's prediction of future interest rates."

"So the market, what we can see is saying, look, we think interest rates are dropping and dropping longer in the long term, which is why five-year mortgages are cheaper than two-year mortgages. So we've seen fixed rate mortgages come down."

Mr Lewis said: "We're talking about the fact mortgage rates have dropped below 4%. I mean, they've been below that for a time now, but the mood music in interest rates, UK interest rates are going down and fixed-rate mortgages are already factoring in some of the predicted future rises."

"So many people are saying, is this the time to fix if you're not fixed already, or you're coming to an end of your deal, or you've hideously moved on to the standard variable rate, which would be around 8%. And whereas the fixes we're talking about, 5 years in the 3.8-ish, and 2-year fixes, because long-term predictions are cheaper, 5 years are cheaper than 2 years, in about, what's it called, an inverse yield curve? Yeah."

Promoting the podcast on Twitter, now X, Mr Lewis said: "This is really worth a listen for anyone with a mortgage - especially if your deal will end soon (or already has and you've done nothing), or you're looking to get a new property (as a first timer or remortgager). Thanks to @montysblog for joining me."