HOMEOWNERS are increasingly choosing to take out a three-year fixed-rate mortgage according to consumer experts at Which?.
Historically, deals for two or five years have been more popular in the past, but what is the difference?
What is a three-year fixed rate mortgage?
A fixed-rate mortgage ensures you can guarantee the interest you are paying stays the same for a set number of years.
It removes the risk of increased payments and allows you to precisely budget during uncertain economical times.
Why choose a three-year fixed rate mortgage?
In the past, most people have chosen a two-year or five-year fixed-rate mortgage.
Two years offers buyers a more flexible option with less commitment, whereas there is the risk of being locked into a much higher rate for five years and having an early repayment penalty to get out of the contract. These fees vary, but can cost thousands of pounds.
In July 2018 the gap in price between two-year and five-year reached its lowest level in five years.
It left many turned off by the prospect of a longer-term mortgage and more keen to have the chance to opt out sooner rather than later.
The choice of a three-year fixed rate mortgage gives homeowners more security for longer, but it’s short enough time to re-negotiate a better deal if circumstances change.
Managing Director of Visionary Finance, Hiten Ganatra, said: “A fixed rate for two years has traditionally been the most popular mortgage option and there are currently some great deals to be had.
“Recently there has been an increase in the number of people considering a three-year fixed rate as borrowers feel a little uncertain about how Brexit will impact the economy and interest rates, but don’t want to be tied down for too long.
“As ever my advice is to contact my team and get some expert advice. Everyone’s situation is different and it’s important you get the right mortgage that suits your needs.”
- Visionary Finance is a fee free mortgage broker based in London and Milton Keynes. Give us a call on 01908 465100 to speak with a member of our experienced team.