@WilliamG 

Connect a PC to the D-link DAP1665 wireless, then try to ping continuouly "CPE210 house 1", "Deco M5", and a outside address.

Once the issue happens, check the reply from your CPE and the Deco M5, it will tell you if the problem is on your local network.

  @Somnus 

I tried pinging IP of CPE210 in house 1, Deco M5 and outside adress (Google 8.8.8.8) continously in cmd I could see spikes of 800ms sometimes and also "Request timed out.", but not as often as with the online ping tester. However the cmd ping is slower so maybe it doesn't register at the same speed?

I also tried running the online tester simultaneously as the cmd pinging but could not see any reference to each other when the 1500+ spikes happen.

  @WilliamG 

The "spikes of 800ms" happens on your ping to the Deco and house 1 CPE?

Then you will need to do further testing. Try ping the house 2 CPE and the Dlink AP, and monitor the spikes happens on which devices.

For example if it happens even when you ping the Dlink, you may check if that is your PC wireless card issue actually.

But if you can ping house 2 CPE without any delay, then the issue is the wireless communication between these two CPEs. You can try to change the wireless channel of house 1 CPE(root AP), and make sure two CPEs are face to face. Many factors may influence the 2.4Ghz wifi performance like bluetooth, other APs

  @Somnus 

I tried pinging outside network and CPE from inside house 1 (both wired and wireless) and could not see any indication that there was a problem in house 1. I also tried pinging the D-link and CPE from house 2 (wired and wireless) without any problem. This led me to believe the problem was in the wireless link between the two houses.

Playing around with some settings on the CPE I found that turning off MAXtream seems to have resolved the issue. I now have a stable ping with rare spikes of around 200ms which seems more "natural". Online gaming seems to work fine at least for now.

Thank you for your support regardless, @Somnus