The digital bank revealed it would branch into three-year fixes for the first time this week.

The average rate on a three-year term has tumbled from 2.62% to 2.55% today – despite the 0.25% increase in the Bank of England Base Rate – according to data from Moneyfacts.

Paul Elliott, lending products manager at Atom Bank, said appetite for fixed-rate mortgage products was growing.

He added: “Based on this increased demand, we wanted to offer something new for customers that gives them even more options when looking for the security of a fixed rate mortgage.

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“It’s a test and learn piece. Our five-year 90% loan to value (LTV) products are some of our most popular, so we think a three-year 90% LTV will prove interesting for customers that aren’t ready to make a five-year commitment.”

 

More lenders enter

At the tail end of last year, Halifax, Skipton Building Society and Accord were among the lenders that launched three-year fixed rates.

Rates are as low as 1.49% at 60% LTV and 1.64% at 80% LTV for three-year fixes – but the number of overall products has fallen from 478 to 419 during the past year.

Lenders may be looking to compete harder for three-year fixed-rates, as the two-year market remains packed with providers offering ultra low rates, according to Rachel Springall from Moneyfacts.

She said: “The two-year fixed market is fairly saturated with low rates and lenders may be unable to reduce their rates much further to compete.

“Therefore, there is potential to entice borrowers with a three-year fixed mortgage instead, particularly if consumers feel uncomfortable committing to a five-year fixed deal.”