While two- and five-year fixed rates remain the most popular mortgage product options among borrowers, brokers say the mid-way option – nicknamed the ‘Goldilocks’ rate by one lender – has risen in popularity.
The availability of three-year fixed rates has almost doubled over the last two years from 354 to 653, according to Moneyfacts’ August update. Network Stonebridge also mentioned three-year fixed rates in its latest market round-up, noting that two-thirds of those fixing in July chose deals lasting three years or fewer, compared to 61% a year ago.
Sonya Matharu-Coxhill, adviser and founder of The Mortgage Atelier, said she had seen an increase in borrowers opting for three-year fixes over the last year.
She said: “Before that, it was few and far between. For many, it’s the middle ground between a two- and five-year fixed rate, which is appealing in an uncertain rate environment. It seems to be providing a level of comfort.”
Three-year deals have been appealing to first-time buyers and remortgaging borrowers.
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“I recently had a remortgage borrower who refinanced from a two-year to a three-year fixed rate.
“The right choice always depends on the borrower’s personal circumstances, future plans, income stability, risk appetite, but it’s worth a conversation for sure,” added Matharu-Coxhill.
L&C Mortgages has also seen a rise in interest from borrowers for three-year fixes.
David Hollingworth, director at L&C Mortgages, said he has seen a fluctuation in borrower demand that often correlates with better pricing and parity with shorter-term rates.
“It would be wrong to say that it’s on a permanently upward trajectory. I could go back to some months early last year and it looks like there’s almost double the proportion of three-year uptake in some months, but that has gone up and down in the interim, so that’s not always been the case.
“However, it does look like a more consistent uptake now, and in the first half of this year, there has been a higher proportion of three-year borrowing than for the same period last year,” he said.
Interest rate uncertainty lingers
Because two- and five-year fixed rates account for the “lion’s share” of mortgage business, this can lead to three-year fixes often being overlooked, Hollingworth added.
“They can offer a really useful option for those who are undecided on how long they should lock in for. They may be attracted by the chance to review rates again in the hope they will have dropped further but feel that two years will come round too quickly when there’s still some uncertainty at play,” he said.
The Bank of England voted to lower the base rate to 4% this month, but persistent inflation, currently at 3.6%, has raised a question mark over how many more rate cuts will follow.
In an interview with the BBC, when asked if interest rates would continue to fall, Bank of England governor Andrew Bailey said: “I think the path is downwards… I think the course is a bit more uncertain, frankly.”
Favourable fixed rate pricing
Pricing of three-year fixed rates is close to that of two-year deals and cheaper than some five-year fixed rates, which has boosted their popularity.
In a video short posted on LinkedIn, Peter Stimson, director of mortgages at Mpowered Mortgages, said: “Swaps on three-years have been at or below two-years and definitely below five-years for most of 2025 and that’s meant very good pricing for three-year products.”
Stimson also tied the duration of a three-year fixed rate to the duration of President Trump’s term in the White House.
“We consider the three-year product the Goldilocks rate, in a sense that… it’s not too short and not too long. Anybody taking out a three-year fixed rate product out now at or towards the end of the Trump regime… that could help customers avoid some of the chaos we saw in the first few months of the Trump presidency, which could be beneficial for some clients if they are worried about interest rate volatility,” he said.
