A 3 year fixed mortgage could provide you with a manageable initial payment and the security of knowing that your payments will not change in the first three years.
3 year fixed rate mortgage deals are available to a wide range of types of borrower, including first time buyers, house movers and those re-mortgaging. They are also widely available to the self-employed.
3 yr fixed rate mortgage deals do not usually offer rates as low as those available with 2 year deals. This is because you're trading a saving in interest rate for the security of knowing your mortgage repayments won't rise for another year.
However, you can expect the rate to be lower than the equivalent 5 year fixed rate deal; in general the interest rate will increase the longer the fixed period.
With base interest rates at such a low, attractive 3 year fixed rates are available in today’s marketplace so they can be a good compromise between security and saving over the mid term.
3 year mortgage deals are generally available to high loan to value borrowers, but the cheapest 3 year fixed rate mortgages for those looking to borrow 90% of their property's value are likely to be significantly more expensive than those who only need to borrow 60%-70% of their property's value. This does tend to be the case with almost all mortgage deals, however.
When you compare 3 year fixed rate mortgages, you should not automatically assume that the lowest 3 year fixed rate mortgage, in terms of interest rate, is the best.
You should also consider the level of fees charged and the length of time for which early repayment charges apply.
Fixed rate deals often have higher arrangement fees than other mortgages, so check how this fee differs between available deals.
Also, while early repayment charges usually cease at the end of a discounted or tracker rate period, they can sometimes continue beyond the end of a fixed rate period, so check this carefully.
Otherwise you may find that your fixed rate period ends and you are faced with the unpalatable choice of either paying the penalty in order to re-mortgage, or paying an uncompetitive standard variable rate until the penalty period has ended.
You should also check how flexible the mortgage is. Will you be able to make overpayments or take a mortgage holiday if times are tight for example.
Only once you've compared your options and worked out which of the 3 year mortgages that meet your requirements offer you the cheapest access to borrowing should you apply for a deal.
