Right Time To Fix?

martynk_2

Hello there
We are just looking at remortgaging, currently 6.1% fixed for 38 more months, ~£7K redemption (with N Rock - do I own my mortgage then?!) and using the switch calculator a fixed rate of under ~4.15% means its worth it.
We've had the following suggested from an IFA:
2 year fixed rate -3.65% with a £995 fee.
3 year fixed rate -3.99% with a £999 fee

4 year fixed rate -4.49% with a £495 fee.
As I see it, there's 2 elements to this, the beginning and the end: for the first, getting the lowest rate fix possible and for the latter getting the right length of fix so we don’t come out after the rates have gone back up substantially. We have thought about this and we feel inclined to go for a 3 year fix, however we are still anxious about getting the best fixed rate at the beginning – so my main quesiton is does anyone have a good idea of which way these fixed rates are tending to move – and whether there’s any indication of how they are likely to move in the next, say, 3 to 6 month period?? I.e. is it worth hanging on a bit or grab the bestoffer now?
(It still seems such a large gap between the Base Rate and these fixed rates, I know the economic circumstances have changed a lot but I seem to recall not that long ago that there were fixed rate deals quite a bit below the Base Rate - which I suppose means it can happen again??)
I looked around financial info on the net and recently seems general feeling is that fixed rates are nudging up a bit - so I know this is very hard to predict but grateful if anyone has got some definite recent stats on this and any advice appreciated.
Cheers, MartynK
NB: looked at trackers and whilst there is a nice one 2 year one working out to about 3.3% currently, I really don't like the propsect of nervously waiting for the latest interest rate changes every single month!

dimbo61

You must have one big mortgage to be paying a ERC of £7k and be better off paying another £1k in fees for a 3/4 year fix at 3.99/4.49%
I dont see how it would pay the fees back if only fixed for 2 years!
Check on "whatsthecost" website by putting all the figures for your existing deal and the 3 other deals and see how much you would have paid off over a 2/3 year period!( dont forget to add the £8k costs to the mortgage amount )

snarffie

dimbo61 wrote: »

You must have one big mortgage to be paying a ERC of £7k and be better off paying another £1k in fees for a 3/4 year fix at 3.99/4.49%
I dont see how it would pay the fees back if only fixed for 2 years!
Check on "whatsthecost" website by putting all the figures for your existing deal and the 3 other deals and see how much you would have paid off over a 2/3 year period!( dont forget to add the £8k costs to the mortgage amount )

A quick look on whatsthecost suggests a mortgage of around £170k on a 20 year term would break even at a saving of around £8.5k over the two year term. This is on a 6.1% against 3.65% rate.

dimbo61

The words BREAK EVEN come to mind after 2 years of paying the mortgage and then he has to start all over again.
Who knows what rates will be in 2 years BUT i dont think the BOE will be 0.5% do you ?
How much equity does the OP have in his home and will he even get the cheaper deals he is looking at , what other costs will there be to move mortgage provider.
If he has £7/8k in savings could he overpay his existing mortgage !!!

martynk_2

Hi there, thanks for responses - its actually a mortgage of about £138K, and when I checked on the calculator (is that "whatsthecost"?) I got this:
On a £138000 mortgage, currently at 6%, with a £7000 early repayment charge
You'd need a new mortgage that's consistently below 4.44% to save
Warning! This is a rough calculation. Always do the full sums (a mortgage broker can help). Plus if the new deal charges an 'arrangement fee', you'll need to find an even cheaper mortgage to make ditching your fixed rate worth it.
With an arrangement fee of £500, you’d need a new mortgage at 4.33% or lower to save
With an arrangement fee of £1000, you’d need a new mortgage at 4.22% or lower to save
With an arrangement fee of £1500, you’d need a new mortgage at 4.1% or lower to save
So I would have thought thats a reasonable saving if I went for the 3.99% I've been quoted for a 3 year fix?
(we've been overpaying to get the term down anyway and will continue to do so, the high redemption is courtesy of lovely N Rock! - includes a bit of carried forward initial fees but its a lot because it was a 5 year fix - remember a few years ago when interest rates were set to continue going up for years?! Its also another reason for changing, to get a lower redemption fee should things change drastically again).
ANYWAY... to get back to my initial query!...any advice on taking a fixed deal now - or waiting a bit longer?? (of course waiting longer does reduce the benefit as the current term shortens unless fixed rates do go down proportionally).