Uncommon mortgage that is now cheapest for UK households
The uncommon mortgage that’s now cheapest for borrowers as they hedge their bets has been revealed. Three-year fixed-rate mortgages have taken the lead as the most affordable option in the current market under the Labour Party government.
Rachel Springall, finance expert at Moneyfactscompare.co.uk, said: "Borrowers would traditionally opt for a two- or five-year fixed mortgage, but as interest rates have been unpredictable over recent years – a three-year fixed deal might gain popularity.
"As the traditional markets are thriving with lenders, it can make it difficult for some lenders to stand out on price alone. The three-year fixed market consists of fewer lenders than the two or five-year sectors, and therefore there are fewer three-year fixed deals, so it may be more fruitful for some to get noticed by pricing their deals to lead that area of the market."
READ MORE: Gregg Wallace 'showed true colours' with one gesture to MasterChef winner
READ MORE: Strictly’s Anton Du Beke shares wife’s brutal assessment of him before major life change
READ MORE Foreign Office warns UK tourists to 'prepare' and says call 11-digit number
Rachel added: "Those borrowers who feel a two-year fixed is not quite long enough may then want to explore the options available on a three-year fixed term, ideally with an independent broker to go find the best deal to suit their circumstances."
Ravesh Patel, director and senior mortgage consultant at broker Reside Mortgages, told Thisismoney.co.uk : "Lenders seem to be pricing in the possibility of Bank of England base rate cuts further down the line, which makes shorter-term fixes comparatively more attractive.
"It's noteworthy that some three-year fixes are now even lower than five-year deals. This could certainly encourage more homeowners to opt for shorter fixes, especially those who believe they might be able to remortgage at a lower rate in a few years."
MPowered Mortgages currently offers the lowest rate across the market at 4.07% for a three-year fix, with a £999 arrangement fee. On a £200,000 mortgage being repaid over 25 years, that would mean paying £1,064 a month.
It beats the lowest two-year and five-year fixes on the market - currently both offered by First Direct at 4.23 per cent and 4.13 per cent respectively, but with a lower fee of £490.