Borrowers are continuing to favour shorter-term fixed rate mortgages as rates slow from their recent highs, Moneyfactscompare.co.uk has revealed.

The retail financial product data group found the overall share of users comparing two-year fixed mortgages increased from 48.4% in February to 55.9% in June, while demand for five-year fixes dropped from 27.7% to 22.9% in the same period.

Moneyfacts said the increase is strongest among remortgage borrowers, where demand for two-year fixes has risen from 59.5% to 66.5%, and homemovers, up from 40.9% to 52.1%.

For those borrowers with more equity, two-year fixed rates are now cheaper than equivalent five-year deals, although borrowers with smaller deposits often still find five-year fixes offer the lower rate, leading them to weigh up the trade-off between cost and flexibility.

Head of consumer finance at Moneyfactscompare.co.uk, Adam French, said that while borrowers are preferring to opt for lower mortgage rates, this “isn’t an approach without risk”.

He concluded: "As recent years have shown time and again, our volatile times can have a rapid effect on borrowing costs.

"The shift is also being supported by pricing. Borrowers with more equity will typically find that two-year fixed rates are now slightly cheaper than comparable five-year deals, making shorter fixes attractive for those looking to refinance again if rates continue to improve.

"However, first-time buyers and borrowers with smaller deposits are facing a different market. At higher LTV ratios, five-year fixed mortgages often continue to offer lower rates than comparable two-year deals, meaning these borrowers must weigh the lower initial cost against the flexibility of a shorter fixed term. That may help explain why first-time buyers appear to be diversifying their choices rather than overwhelmingly switching to two-year fixes."

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