The magic number? New three-year mortgage rates can BEAT shorter and longer fixes
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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
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 |
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.
Mortgage rates have risen substantially over recent years, meaning that those remortgaging or buying a home face higher costs.
That makes it even more important to search out the best possible rate for you and get good mortgage advice.
Quick mortgage finder links with This is Money's partner L&C
> Find the right mortgage for you
To help our readers find the best mortgage, This is Money has partnered with the UK's leading fee-free broker L&C.
This is Money and L&C's mortgage calculator can let you compare deals to see which ones suit your home's value and level of deposit.
You can compare fixed rate lengths, from two-year fixes, to five-year fixes and ten-year fixes.
If you’re ready to find your next mortgage, why not use This is Money and L&C’s online Mortgage Finder. It will search 1,000’s of deals from more than 90 different lenders to discover the best deal for you.
> Find your best mortgage deal with This is Money and L&C
Mortgage service provided by London & Country Mortgages (L&C), which is authorised and regulated by the Financial Conduct Authority (registered number: 143002). The FCA does not regulate most Buy to Let mortgages. Your home or property may be repossessed if you do not keep up repayments on your mortgage.
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