Wanting reliable and dependable mortgage payments? A 3-year fixed rate period may be your ideal solution. In this in-depth guide, not only will you understand what a 3-year fixed rate is, but also who it benefits most and tips on finding the best bargain out there!
What is a 3-year fixed-rate mortgage?
Are you a budget-savvy individual who prefers the security of fixed payments over volatile market fluctuations? A three year fixed rate period on a mortgage might be for you! With this type of mortgage, your interest rate is locked in for three years, providing peace of mind and financial predictability. You no longer have to worry about changes in interest rates affecting what you owe each month – simply enjoy stable repayment amounts throughout those 36 months!
In three years, you will be transferred to your mortgage lender’s standard variable rate (SVR) unless you refinance for another mortgage deal. It is essential to keep in mind that the SVR could potentially be higher than what was offered with your fixed-rate mortgage, so it may benefit you financially to consider all of your options 6 months before the fixed term mortgage ending.
Is a three-year fixed-rate mortgage right for me?
If you’re looking for secure and reliable monthly repayments in the next three years, a 3-year fixed rate might be the best option. Especially if there is any risk of being unable to afford higher monthly payments due to an increase in interest rates. With this type of fixed rate mortgage deal, you can rest assured knowing what amount will be due for each payment during these three years!
Nevertheless, it is worth pointing out that a fixed-rate mortgage does not necessarily suit every situation. If there are chances of you relocating or paying off your loan ahead of time, extra charges may be applicable. These costs can eventually add up and therefore should be taken into consideration before making any decisions.
How do I find the best 3-year fixed-rate mortgage deals?
With so many 3-year fixed-rate mortgages out there, it’s essential to compare them thoroughly in order to find the best 3-year fixed-rate deal. Get started now by reaching out to our mortgage advisors who are all fee-free and have access to the whole mortgage market. Our specialists can expeditiously give you the most favourable mortgage rates based on your specific circumstances. We have access to over 90 UK mortgage lenders, we survey more than 14,000 different mortgage rates and products!
When comparing mortgage deals, it is essential to factor in not only the interest rate but also a more comprehensive representation of the total cost known as APRC (Annual Percentage Rate of Charge). The APRC considers all associated fees and charges which makes it an invaluable tool for ascertaining an accurate determination.
By taking into account any additional benefits of the mortgage, such as overpayments and payment holidays or cashback offers, you can decisively reduce total expenses for a three-year term as well as the lowest monthly repayments. Not only that but these features have the potential to make a considerable impact on your budget.
Can you fix a mortgage for 3 years?
Although the most common fixed-rate length in the UK is 2 or 5 years, a three-year fixed-rate mortgage is very possible. 2023 has seen an increase in the number of people opting in to fix their mortgage for 3 years. Our advisors believe that this is down to the 2022 base rate increases as many people are finding 2 years too short, 5 years too long, and 3 years just right!
Below we look at some advantages of disadvantages of choosing to fix your mortgage for 3 years.
What are the advantages of a 3-year fixed-rate?
Choosing a 3-year fixed mortgage offers you unparalleled stability and peace of mind. No matter what the economic climate, your fixed repayments remain constant for three years, allowing you to accurately plan out your finances with confidence – perfect if money is tight or other financial obligations are at play.
With a fixed-rate loan, you can relieve yourself of worry and anxiety about any potential interest rate increases. You’ll be safe from any financial strain even if the mortgage rates spike during your three-year term as your repayments will remain steady regardless of what happens in the market. This assurance provides added stability to long-term planning and budgeting for years ahead!
What are the disadvantages of a 3-year fixed-rate?
A three-year fixed-rate mortgage can be an effective way to manage your finances, yet it carries two major drawbacks. Firstly, you are unable to profit from any drops in the mortgage rates during the three years which could otherwise save money on payments. Secondly, as these mortgages provide security through a locked rate, they come with slightly pricier terms than variable ones – meaning more expensive monthly instalments over the term of your loan.
If you’re not content with your lender’s standard variable rate, or if you haven’t paid off your mortgage yet, you’ll need to remortgage in three years and that could be quite a hassle. Plus, it might also cost some money on arrangement fees – so make sure to factor this into the equation when deciding which deal is right for you!
If you need to move or pay off your mortgage earlier than planned, bear in mind that in most cases an early repayment charge will apply if you leave a fixed interest rate before the end of its term. This could be quite costly so make sure to take this into account when deciding whether switching is right for you.
3 year fixed rate mortgages over the last 10 years
Below is a table and graph the shows what the average UK mortgage rates were for 3 year fixed rate mortgages from 2013 to 2022.
| Mortgage Rates by Type and Year | |||
|---|---|---|---|
| Year | Fixed-rate (2 years) | Fixed-rate (3 years) | Fixed-rate (5 years) |
| 2022 | 4.00% | 4.49% | 4.73% |
| 2021 | 1.98% | 2.45% | 2.74% |
| 2020 | 1.81% | 1.95% | 2.25% |
| 2019 | 2.46% | 2.65% | 2.85% |
| 2018 | 2.51% | 2.90% | 3.10% |
| 2017 | 2.25% | 2.65% | 2.86% |
| 2016 | 2.35% | 2.75% | 2.92% |
| 2015 | 2.67% | 3.05% | 3.26% |
| 2014 | 3.28% | 3.55% | 3.77% |
| 2013 | 3.54% | 5.85% | 4.01% |
Fixed Rate Mortgages
A fixed-rate mortgage provides you with the assurance of reliable, unchanging monthly repayments for a predetermined amount of time – typically between 2 and 10 years. This means that no matter how much interest rates increase or decrease in your region during this period, your mortgage repayments remain stable so you can plan better.
By opting for a fixed mortgage rate, you gain a secure financial planning certainty. You’ll be able to anticipate precisely what your monthly mortgage payments will look like throughout the prearranged period and dodge any unpleasant surprises along the way. This is an ideal choice if you’re looking for more control over your budget!
Mortgage Deal
When you’re in the market for a mortgage, it’s critical to search and compare different offers to get the perfect one for your needs. Mortgage deals are special lending products offered by loan companies that can differ greatly from each other. The best mortgage deal is out there waiting—you just have to find it!
When choosing a mortgage, it’s necessary to weigh up your options thoroughly. There are fixed-rate mortgages, variable-rate mortgages, tracker mortgages and offset mortgages – each with its own set of benefits and drawbacks. By taking the time to research these different types of loans in advance, you can be sure that you’re making an informed decision regarding which type is best suited for your needs.
When deciding which mortgage best suits your needs, consider the interest rate, APRC fees, features, and benefits that come with it. Additionally, consider the length of time you plan on having this fixed rate deal as well as any early payment charges associated with repayment. Comparing offers is key to finding a great mortgage deal to fit all your criteria. Get in touch with our experienced advisor team today, our service is free!
At YesCanDo we have seen an increase in clients asking for 3-year fixed rates over the last few months. The feedback we are getting is 2 years is too short and 5 years seems such a long time to commit. With Interest rates being very unpredictable at present it seems that the trend for 3 years fixed rate mortgages is likely to continue. – Steve Roberts (YesCanDo Money CEO)
Overall Cost for Comparison
When shopping for mortgages, it’s essential to weigh the entire cost of the mortgage – not just the interest rate. There are several components that add to the total expenses, such as arrangement fees, valuation fees, and legal charges in addition to early repayment charges. The Annual Percentage Rate of Charge (APRC) encompasses each one of these factors so you can gain an accurate perspective when assessing varied mortgage deals. Don’t settle on a loan until you consider all aspects involved in the mortgage product you are getting!
Our advisors are skilled in explaining the overall APRC rather than individual rates. They will give you a clear picture of the overall mortgage cost ensuring that you find the best mortgage deal available with no hidden surprises over time!
Conclusion
When it comes to planning your finances for the foreseeable future, a three-year fixed-rate mortgage can be an excellent option that offers stability and confidence. But before you make this decision, it’s essential to weigh out all of the pros and cons carefully!
When comparing mortgage offers, evaluate the entire price and factor in any advantages or extras that accompany it. Don’t be afraid to ask for help if you’re unsure about which one is best – a professional mortgage consultant can give invaluable guidance.
FAQs
Can you repay a three-year fixed-rate mortgage early?
Repaying a three-year fixed-rate mortgage ahead of time is indeed possible, yet it could bring early repayment charges. It's essential to take into account these fees when assessing if paying off your loan earlier than planned is worth the cost. That said, remember to read through all conditions and terms in your mortgage contract; this way you can be sure what kind of charges will apply before making any decisions.
How does a fixed-rate mortgage differ from a variable rate mortgage?
A fixed-rate mortgage guarantees that you will have the same rate of interest for a set period, giving you financial stability and allowing for accurate budgeting. Alternatively, with a variable rate mortgage your repayment amounts may be unpredictable due to changes in the interest rate over time. It is worth noting that fixed-rate mortgages tend to be more expensive than their variable counterparts as they offer protection from rising mortgage rates in the future.
Is an SVR more costly than a fixed-rate mortgage?
If your current mortgage is an SVR (standard variable rate), it's likely more expensive than a fixed-rate loan. Of course, the exact cost varies between lenders and the market rates available at that time. Nevertheless, if you're on an SVR, remortgaging to a fixed-rate could be advantageous as it offers stability and predictability in payments.
Can I get a three-year fixed-rate mortgage with no fee?
When you're shopping for a three-year fixed-rate mortgage, it's worth noting that some may come with no fees but higher interest rates than options that do have fees. To get the full picture and compare mortgages correctly, make sure to examine the overall cost (APRC) which factors in all associated charges and expenses.
Where can I compare three-year fixed-rate mortgages?
If you're interested in calculating your three-year fixed rate mortgage, take advantage of a whole-of-market mortgage comparison tool. Or if you'd like to get access to an even wider range of mortgage products without any fees, reach out for help from a fee-free broker who has access to exclusive broker tools that will display the best options tailored just for you!
What happens to interest when the term expires?
Before the expiration of your three-year fixed mortgage, it is important to research and consider other options available. Otherwise, you may be moved onto your lender's standard variable rate (SVR), which could mean that interest rates fluctuate without warning. Evaluating your financial situation prior to this event can help prevent any unexpected unpleasantness!
What are the alternatives to a three-year fixed-rate mortgage?
There are several alternatives to a three-year fixed-rate mortgage, including 2-year, 5-year or 10-year fixed-rate mortgages, variable rate mortgages, tracker mortgages, and offset mortgages. It is essential to take your time and thoroughly consider all of the various mortgage options available, as each comes with its own positives and negatives. To ensure you make a wise decision that best fits your needs, seek advice from an experienced mortgage advisor.
Can I get a three-year fixed-rate remortgage?
Yes, it's possible to get a three-year fixed-rate remortgage if you're currently on a different type of mortgage. Nonetheless, it's essential to thoroughly look over the existing mortgage terms and conditions to check if there are any costs that might apply when making early repayments. It is just as important to take into consideration the complete cost (APRC) when assessing remortgage deals too.
Is it best to get a 2 or 5 year fixed mortgage?
When it comes to selecting between a 2-year and 5-year fixed mortgage, the choice ultimately depends on your individual situation and objectives.
If you’re uncertain of your upcoming plans, a 2-year fixed mortgage can be the most suitable option for you. Not only does this type of loan provide greater flexibility, but it allows you to evaluate and reassess after its completion.
Opting for a 5-year fixed mortgage provides you with greater stability and predictability in your monthly payments. It is perfect for budgeting, as it also protects against potential future interest rate increases. With this security, you can plan financially with more confidence!
