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The magic number? New three-year mortgage rates can BEAT shorter and longer fixes
A trio of competitive fixed rate mortgage deals are offering a different option to those wavering between whether to fix for two or five years.
The three-year fixes offer a middle ground, as borrowers attempt to work out whether to take a chance on rates falling or lock in for longer.
Mortgage broker L&C has launched exclusive three-year fixed remortgage products, with rates as low as 4.02 per cent. Offered in partnership with lender MPowered, this is one of the cheapest deals on the market for a three-year fix.
The headline rate is beaten only by a 3.95 per cent rate with Yorkshire Building Society, and a 3.99 per cent rate with Santander.
With some borrowers torn between a two-year and five-year fix at the moment, a three-year deal offers extra flexibility.
The cheapest two-year fix at the moment is 3.99 per cent, with an £899 fee, and the cheapest two-year fix is 3.91 per cent, with a £995 fee.
> Quick link: Compare remortgage deals based on your home's value with L&C
The magic number: Borrowers torn between fixing for two and five years have good options
How do three-year fixed rate mortgages compare?
The lowest rates on these three-year fixed rate mortgages are available to those who want to borrow less as apercentage of their home's value and are willing to pay fees.
For example, you can access L&C's headline three-year fixed 4.02 per cent rate, if you want to remortgage with 40 per cent equity and pay a £999 fee.
Those with less equity, or who don't want to pay a fee, will pay more - see the full range of rates below.
| L&C's THREE YEAR FIXED RATE MORTGAGES | ||
|---|---|---|
| Deposit/equity | £999 fee | No fee |
| 40% | 4.02% | 4.22% |
| 35% | 4.09% | 4.29% |
| 30% | 4.10% | 4.30% |
| 25% | 4.12% | 4.32% |
| 20% | 4.44% | 4.64% |
| Source: L&C Mortgages | ||
Depending on how much you’re looking to borrow, L&C’s new deals may beat many on the market, but borrowers should consider whether the length of fix is right for them and seek advice from a broker.
You can compare the deals above with the latest average remortgage rates over two and five years from Rightmove, below. These include deals across all deposit sizes.
| Length of fix | Average remortgage rate | Lowest remortgage rate |
|---|---|---|
| Two years | 4.94% | 4.13% |
| Five years | 4.71% | 4.04% |
| Source: Rightmove, 16 April 2024 | ||
Why go for a three-year fix when remortgaging?
The pace of interest rate cuts is expected to accelerate – economists are predicting the Bank of England will lower the base rate from 4.5 per cent to 4.25 per cent at its next meeting on 8 May.
Since interest rates shot up in 2022, longer fixed mortgage deals have generally been priced more attractively than shorter ones.
Recently, two-year fix mortgages have emerged that are cheaper than five-year ones - but two-year deals are still more expensive on average.
With further rate cuts potentially on the horizon, three-year deals offer borrowers a sweet spot between competitive rates and the flexibility to move onto a new deal earlier.
David Hollingworth, associate director at L&C Mortgages, said that three-year rates ‘are often overlooked but offer a good middle ground for those wracked with indecision over how long to fix.’
A price war over mortgage rates is heating up, with banks battling to offer the best mortgage deals.
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