1. Expectations of Lower Interest Rates

Many landlords believe the current interest rate environment may soften over the next couple of years. With the Bank of England having started to reduce rates and further cuts possible, some investors are reluctant to lock into a 5-year rate today if cheaper borrowing could be available in 24 months.

2. Affordability Benefits

In many cases, 2-year products offer lower headline rates than equivalent 5-year fixes (albeit often with higher fees). This can improve Interest Coverage Ratio (ICR) calculations, helping landlords borrow more or meet affordability requirements.

3. Regulatory Uncertainty

Ongoing Renters' Rights reforms continue to create uncertainty. As a result, many landlords are taking a “wait and see” approach rather than committing to longer-term financial arrangements. The potential impact on possession rights, tenancy management, and future profitability means many investors prefer flexibility rather than locking themselves into a 5-year mortgage commitment.

4. Portfolio Review Opportunities

A shorter fixed period provides landlords with the opportunity to reassess their portfolio sooner. Whether that’s refinancing, restructuring debt, selling assets, or expanding holdings, a 2-year product allows investors to react more quickly to changing market conditions.

5. Calculated Risk Versus Long-Term Security

While 5-year fixes still appeal for their certainty, many landlords are willing to accept some refinancing risk in exchange for lower costs and greater flexibility today.

What We're Seeing at Foundation

This trend is clearly reflected in our own lending data. May was our strongest month for 2-year fixed rate business, highlighting a growing preference for shorter-term options.

Conversations with brokers suggest landlords are increasingly focused on maintaining flexibility, benefiting from stronger affordability calculations, and positioning themselves to take advantage of potential rate reductions in the future.

The Bottom Line

The choice between a 2-year and 5-year fixed rate comes down to flexibility versus certainty. Right now, lower rates, improved affordability, and market uncertainty are making the 2-year option particularly attractive. And the record level of 2-year fixed business seen at Foundation in May suggests this shift in landlord behaviour is already well underway.