Compare 3-Year Fixed Rate Mortgages

Borrowers won’t benefit from falling interest rates if they are locked into a deal. And the initial fees for taking out a fixed-rate mortgage need consideration.

Typically the lowest fixed rate mortgage deals will carry arrangement fees of around £1,000 which can be paid upfront or added to the loan amount.

There could also be stiff financial penalties for ditching a fixed-rate mortgage before the end of the term, known as early repayment charges (ERCs).

Choosing how long to fix depends entirely on your own circumstances. First-time buyers with ambitions to move house within a couple of years might prefer to fix for a shorter period to avoid early repayment charges (ERCs).

However, someone with no plans to move might benefit from fixing for longer – avoiding having to review their mortgage too frequently and pay arrangement fees each time a switch is made.

They’re not hard to find. The vast majority of lenders offer fixed rate deals because they are so popular. Borrowers can either apply directly with a bank, building society or specialist lender – or use a licenced mortgage broker.

While there are deals that lenders will offer exclusively to the borrower, brokers may also be able to access deals that are not available on the ‘open market’. And their expertise can be invaluable where an applicant’s finances are not conventional.

While some mortgage brokers charge a fee, others such as Better.co.uk don’t charge the customer taking their commission from from the lender instead.

A successful mortgage application depends on your eligibility criteria – such as how much you earn, your partner’s income if it’s a joint mortgage, and how much other debt is outstanding from credit cards or loans.

Your credit rating is also key. This is based on your history as a borrower and your expected ability to repay a loan in future.

An arrangement fee is commonly payable when you take out a mortgage. Costs vary but £1,000 is normal for a competitive deal. If there’s no arrangement fee, the interest rate is likely to be higher.

It’s possible to add an arrangement fee to your mortgage debt rather than have to find it upfront. However, this will increase your loan amount and, in turn, the interest you pay.

A booking fee is a non-refundable one-off cost when you apply for a mortgage. Not all deals come with one, so costs range from zero to a couple of hundred pounds.

Valuation fees can also be payable, which allows lenders to check properties are worth the sum borrowed. But these can also often be waived as an incentive to customers.

Another fee however, is the ‘early repayment charge’ (ERC), which is triggered if a borrower quits their fixed-rate mortgage before the end of the agreed term.

Usually, it’s a percentage of the sum outstanding – somewhere between 1% and 5% is typical – potentially adding up to thousands of pounds. Many ERCs are charged on a tiered basis, where the percentage reduces with every year of the deal.

However, borrowers expecting to move house in the near future should think carefully about the length of their fixed-rate mortgage to avoid this fee.

Account or exit fees may also be charged in relation to the administrative tasks of creating or closing a mortgage.

Our guide to mortgage fees has more detail.

While the name suggests otherwise, these mortgages aren’t generally as rigid as the interest rate. It is usually possible to overpay a fixed-rate mortgage – often by up to 10% of the total loan each year. This reduces the total interest you pay and helps to clear the balance sooner.

Many deals are also ‘portable’, allowing you to move house and take a mortgage rate with you. If this option is included, however, it is not guaranteed and is subject to eligibility.

It can make sense to cut loose from a fixed-rate deal early in some circumstances, such as when a more competitive deal comes along.

But bear in mind that withdrawing from the deal before the end of the term will trigger an early repayment charge, typically in the range of 1% and 5% of the outstanding debt.

Lenders might operate a tiered charging system, reducing the exit penalty fee each year as the end of the term draws nearer. But any new mortgage deal needs to generate savings in excess of the fee to make an exit worthwhile.

When a fix ends, borrowers are automatically put onto their lender’s standard variable rate (SVR).

The SVR is not usually competitive compared to other deals but has flexibility. For example, there will be no charge to switch away and you can usually overpay without restriction.

However, most people will benefit from choosing a new deal before they land on their lender’s SVR. Often borrowers can secure a new deal six months in advance of their fixed deal ending, and in some cases longer.