Three Year Deals Gain In Popularity
The fees on mortgages have gone up and so have the rates - except on three-year deals which have come down. These medium-term mortgages help reduce the effect of large fees for borrowers.
Three-year fixed rate mortgages are becoming popular as their costs have actually gone down while all others around them are going up!
Home loan deals are subject to the highest fees ever – the cheapest mortgages now cost about £1,000 – and homeowners are choosing medium-term deals as a result. This helps to reduce the fees paid over a longer term, but does not tie the borrower down should mortgage rates come down in the next few years.
The last month has seen two-year deals slump in popularity. Where they used to account for 25% of mortgage deals, the latest figures from the Bank of England show that three-year fixed rates work out better value. With a deposit of 75% the cheapest three-year rate is 5.68%. With similar deposits two-year rates average 6.08% and five-year deals have an average of 5.87%.
It is fascinating to see that rates for three-year deals have gone down by 0.12% since February, whereas two-year fixed rates have gone up by 0.34% and five-year deals are up by 0.19% in the same period. No wonder they have become more popular.
Nationwide Building Society is offering a three-year fixed rate at 5.75% for a deposit of 25%, and comes with a fee of £599. Monthly repayments on a £150,000 loan would £944 for this loan.
The Post Office has deal suitable for someone with a smaller deposit. For only a 5% deposit its three-year fixed rate is 5.89% with a £599 fee, available only at branches.
For those remortgaging the Abbey is offering free legal fees and valuations for a rate of 5.87% and a fee of £999.
The Abbey also has a good five-year fixed rate of 5.69%, but the fee is £1,499 and a deposit of 40% is required. The deal is available only through brokers.
For the moment, three-year deals hold sway – but you’ve got to have that all-important deposit.
