Best 3 year fixed rate mortgage deals

What is 3 year fixed rate mortgage?

A 3 year fixed rate mortgage is a type of mortgage where the interest rate and the monthly repayments are fixed for three years. This means that even if interest rates fluctuate, your rate won’t and neither will your monthly mortgage payments.

A three year fixed rate mortgage could be a good choice for you if you like the certainty of knowing how much you’ll have to repay every month for the next three years. It can help you with planning and budgeting, and many people like the peace of mind that a 3 year fixed rate mortgage can provide, as it means their payments are guaranteed to stay the same for the term of the initial deal.

In return for the peace of mind that your repayments will stay the same for the next three years, this type of mortgage tends to be slightly more expensive than a variable rate mortgage. The longer the fixed rate mortgage term you choose, the more expensive your mortgage payments are likely to be. This generally means 3 year fixed mortgage rates in the UK are typically cheaper than 5 or 10 year fixed rate deals, but more expensive than a 2 year deal.

Why choose a 3 year fixed mortgage?

There are a few reasons you might go for a 3 year fix:

• Your payments are predictable for three years
• Deals are usually cheaper than 5 or 10 year fixes
• You’re not tied in for too long if your plans might change
• You’re protected from rate rises in the short term

A 3 year fix can suit people who want stability without committing to a long-term deal. It gives you time to settle in, plan ahead, or wait to see what happens with interest rates.

Disadvantages of 3 year fixed rate mortgages

There are a few downsides to consider too:

• You’ll need to remortgage sooner than with longer deals
• If rates fall, you won’t benefit during your fixed term
• You might face early repayment charges if you switch or pay off your mortgage early

Some people prefer longer fixes if they want to lock in a rate for peace of mind. Others prefer the flexibility of a shorter fix like two years. A 3 year deal can be a good middle ground.

How do 3 year fixed rate mortgages work?

Once your mortgage is in place, you’ll pay the same amount every month for three years. After that, unless you remortgage, your lender will usually move you onto their standard variable rate.

This could mean your payments go up or down depending on market conditions. That’s why many people plan to switch deals before the fixed period ends.

You can usually choose from repayment mortgages, where you pay back some of the loan each month, or interest-only mortgages, where you just pay the interest and repay the full amount later.

Who can get a 3 year fixed rate mortgage?

The eligibility criteria for 3 year fixed rate mortgages, just as with any other mortgage type, vary between lenders. They will be looking to see that you can afford repayments not just when you get your mortgage, but also for the whole mortgage term - so as well as proof of income, they’ll be looking at your spending habits and may want to know if you expect your circumstances to change.

You should have the following prepared before starting the process of applying for a mortgage. The more information you have, the more likely you are to get the best 3 year fixed mortgage rates:

• 3-6 months of payslips
• 6 months of bank statements
• Proof of any benefits received
• P60 from your employer
• Utility bills

If you’re self-employed, you’ll also need to share your tax returns or company accounts.

How to find the best 3 year fixed mortgage rates

You can use our Mortgage Finder to check the best 3 year fixed rate mortgage deals from over 90 lenders. Rates can change daily, so it’s worth keeping an eye on the market.

Some deals will offer lower rates but higher fees, while others may offer fee-free options with slightly higher rates. We can help you compare everything to find the best option for your situation.

Our expert advisers will also explain how any early repayment charges work and what happens when your fixed deal ends.

Repaying your 3 year fixed mortgage

The biggest benefit of 3 year fixed rate mortgages is that you know exactly how much you’ll have to repay every month for the next three years, so you can budget with certainty during that time.

When the three years end, you’ll usually be moved onto your lender’s standard variable rate (SVR), which is often higher than your fixed rate, meaning that your monthly repayments may increase at this point. You can either remortgage or look for another deal with the same lender once your fixed term is over.

If you wish to change your mortgage during the three year fixed term, or have to pull out for any other reason, you’ll likely be liable for an Early Repayment Charge (ERC), which is often a significant amount of money.