Are more borrowers going for three-year fixes? Should they?

3 year fixes are a great product, however, unfortunately, they are not offered by many lenders so if fixing the standard often ends up being 2 year or 5 year. HSBC are one of the main providers that offer 3 year fixes and they are quite competitive currently and for many people are a good horizon timescale. For many 2 years is seeming a bit short at the moment, but 5 year possibly too long and expensive so many are going for a 3 year fix with the hope things will have settled down rate wise a little by then and hopefully they can at that stage secure a more competitive offering than now

Few of our clients are opting for the three-year fixes as the rate is often the same as a two-year fix. Clients that are more risk averse and looking for longer term stability are opting for five years as the fixed rate tends to come in much lower, resulting in a lower monthly repayment.

We are not seeing particular trends across borrower type, but more on the type of risk appetite clients have.

We would suggest a three-year fix where a client wants stability of repayments for a three-year period, but feels that within five years rates will have reduced and wants to benefit from this.

Generally, we are seeing much more interest in other mortgage terms, such as 2, 5, 1 year or tracker terms, again it’s really a case of the client’s individual circumstances, view of the wider economy and risk appetite.

We have no data to say that mortgage applicants are opting for a 3-year rate - despite the fact that they often factor at the same percentage rate as 2-year deals. On the whole the 2-year fixed market isn't as appealing as the 5-year deals however the fact that you could be stuck on a high fixed rate for another 3 years, with a 5-year, does see a push for 2-year fixes. The feeling seems to be that the higher-than-hoped-for rate pain will only last for 2 years and you can get to review it at that stage with a hopeful normal-looking inflation rate having brought more positivity to the mortgage market.

Lenders have always had an odd way of counting; with 1-, 3- and 4-year periods often being overlooked when they price deals. Likewise, over 5 years we often find the odd 7-year deal before we then get to 10-year deals. This is a shame, as often 2 years feels too short and 5 years too long; so having a middle-ground option can be the goldilocks solution. Currently, the few 3-year deals that are in the market, are often awkwardly priced; being more costly than the more popular 2- and 5-year options - which is confusing for clients (and brokers) as the expectation would be for them to be priced somewhere in between.

With the latest good news released from the Nationwide that mortgage approvals are up, many borrowers may feel cautiously optimistic about securing financing.

We’ve seen an uptick in the number of people asking about 2 and 3-year fixed terms. The tendency for clients to favour fixed rates seems prominent, with many wanting to do so for shorter periods in case rates fall back, whereby they can then refinance again earlier without penalty.

Whatever else is going on right now, an individual borrower may have something to gain. But let’s be clear. Every case is different, and our job as mortgage advisors is to assess the person right in front of us and make sure they get the right deal for them.

Castle View Finance's core business is investors, which commonly is an 'interest only' 2 or 5-year fixed rate product subject to the strategy of the clients. We have seen an increase in non-fixed products to allow for breathing space for rates to settle, as well as much longer-term products.

7- years and the 10-year product range has been popular as this has created a level of stability, as we like to say if the case fits there is no point in continuously re-leveraging property, which erodes equity and cashflow.

The focus on mid-term products hasn't taken off in our opinion, as this is neither here nor there, two years if you think the rates coming down or as long as possible if the client is looking for long-term stability.