The mortgage market appears to be adapting to the danger posed by slowing growth when the sugar rush of public money comes to an end.

Fixed rate mortgages are governed by what the lenders think is likely to happen to Bank of England’s interest rates in coming years. Five-year fixes are nearly always more expensive than two-year ones because they offer better security.

But at 3.01pc, the average five-year loan is now only 0.15 points higher than the typical 2.86pc two-year mortgage.
Halifax has even launched a five-year fixed-rate loan which is cheaper than the rate on its two-year deal.

It suggests that some players in the market fear that the economy is slowing. This will force the Bank of England to stop putting rates up or risk doing serious damage.

Experts also said fierce competition among lenders and banks’ risk appetite may also be causing the unusual move.

Simon Rubinsohn, chief economist at surveyor trade body RICS, said the move either “there’s not a great deal of pessimism about interest rates going up, or there might be more pessimism about the economy because they’ve got to come down”.

He added: “What you’re seeing there is a fairly flat picture and that tells me that the market is expecting interest rates to go up a little bit more [and] not expecting them to be aggressive.”

Andrew Wishart, property economist at Capital Economics, said the move in lending rates for homeowners reflects shifts in wider financial markets but also more specific mortgage trends, such as risk appetite.

Economists warned the weak levels of growth mean Britain’s economy is now at risk of contraction as spending is hammered by the rising cost of living.

Tepid GDP growth in February was partially a result of a falloff in test and trace and vaccination activity.

Spending on vaccination fell 65pc over the month as push for booster jabs spurred by the omicron waves petered out.

James Smith, from ING, said: “The winding down of the UK’s booster vaccine and Covid-19 test campaigns weighed on growth in February and will continue to do so for the next few months. Combined with the cost of living crisis, falling confidence, and the presence of an extra bank holiday, we expect second-quarter growth to come in slightly negative.”