Ditching 10 year fixed

Dan_1976

Well you have to apply other people situation and not judge on your own!

I am no Conrad fan, I have had many spats with the great man!

VIGILANT22

[QUOTE=Dan_1976

Well you have to apply other people situation and not judge on your own! QUOTE]


Dan 1976… To quote you “Well you have to apply other people situation and not judge on your own”…….. However on your signature you have “I am giving an opinion not advice!”….so why should I be any different
Andrewmp…..has posted he is happy to be in a fixed for the security…which is fine as this means he is a cautious investor and does require the security of a fixed.

The OP has 35k later this year, if this was known (endowment maturing) why did they time themselves into such a restricted mortgage..however it could be an unexpected windfall.

The OP is open to feedback regarding exiting and going on a tracker so going by that he is not 100% cautious.

I have at no time on here commented as to whether he should redeem the mortgage or pay penalty for overpaying…..
Fgs…..people come on here for different opinions…it would be a very boring forum/world if we all posted the same….. so I think your comment “Well you have to apply other people situation and not judge on your own!”….is nothing other than petty.
I stick by my opinion regarding choosing a 10yr fixed when rates were falling….

To Boris411………If you stick with your current mortgage apply the lump sum later this yr….. taking into consideration the penalty…by the saving on interest your mortgage will finish around the time yr 10yr deal comes to an end….

opinions4u

There is little wrong in selling a 10 year fix with ERCs. The climate at the time of sale showed no indication of deep rate cuts and there was significant uncertainty.

Selling a product with ERCs when the borrower is known to have £35k coming their way 18 months later? That could be a case for mis-selling.

boris411

Thanks for all the advice.
At the time of taking out the mortgage ,we wanted the security of a fixed rate and were not sure which way interest rates would ultimately go,and the choices did not feel that great at the time.On reflection a 5 year fixed would have been better.
However our circumstances have changed , totally unexpectedly.
We will probably pay off as much of the mortgage as we can and reduce the term to 8 years ,and just be grateful for our good fortune--6% does sting a bit tho.

VIGILANT22

opinions4u wrote: »

There is little wrong in selling a 10 year fix with ERCs. The climate at the time of sale showed no indication of deep rate cuts and there was significant uncertainty.

Selling a product with ERCs when the borrower is known to have £35k coming their way 18 months later? That could be a case for mis-selling.

Well, you have yr opinion and I have mine...it depends very much on one's own risk profile ....plus nowadays peoples circumstances/plans/lifestyles change more now than they did in the past...hence the reason I don't generally look favourably on 10yr tie in's.

Re' rates..."Base rate started falling in Dec 2007 when it came down from 5.75% from 5.5%....Oct 08 it was 4.5% and the following month it was 3%....I would call these drops significant...Rates started dropping 2 years & 3 months ago

VIGILANT22

opinions4u wrote: »

There is little wrong in selling a 10 year fix with ERCs. The climate at the time of sale showed no indication of deep rate cuts and there was significant uncertainty.

Selling a product with ERCs when the borrower is known to have £35k coming their way 18 months later? That could be a case for mis-selling.

the sting is outweighed by what yr saving on interest...:)

opinions4u

VIGILANT22 wrote: »

Re' rates..."Base rate started falling in Dec 2007 when it came down from 5.75% from 5.5%

Oh come on, 0.25% is totally meaningless in the great scheme of things.

....Oct 08 it was 4.5% and the following month it was 3%....I would call these drops significant...Rates started dropping 2 years & 3 months ago

The OP has had the loan 18 months. That suggests completion in August 2008 - application probably a couple of months earlier.

The significant action started well after a mere mortgage adviser had spoken.

(I agree with your points about "individual circumstances" and also that, subject to the penalty amount it is almost certainly right for the OP to repay capital anyway if there are no other debts to repay first).

VIGILANT22

[QUOTE=opinions4u;Oh come on, 0.25% is totally meaningless in the great scheme of things.QUOTE



I posted earlier on here rates started dropping in Dec 2007 and someone posted back quote " don't think it was actually"...whether it was "totally meaningless" or not is doesn't alter the fact rates started to drop then......they didn't go up! Do you regard a 0.25% increase in base meaningless!!??

The OP has said himself on reflection he'd have been better with a 5yr rate..you may well say hindsight etc....but it is amazing the amount of people who think a 10yr is the answer until they start discussing the pros and cons of being tied in for 10yrs...many then change to 5yrs allowing them security but not so restricted..

Jacka87

10 years is a long time and you need to be really sure when you take 1 out. Now that you have tho I would be suggesting you really think before paying it off. What you need to think about is the difference between the best rate you can get now and how high the rates would have to go for the second half of the 10yr deal along with the erc for the potential savings just now to be cancelled out.

If you think that rates will stay low for a while then maybe you should pay the erc and move, on the other hand if you think they will go very high at some point then you need to stay put.

The fact that you took out a 10yr fix in the first place makes me think you should stick with what you have got. Either way their is always the what ifs, the I could save if I switched vs the at least I know my repayments. Just depends what type of person you are with regards to that risk.....

getmore4less

boris411 wrote: »

Hi,
We have 8 years 6 months left on a 10 year fixed ,at 5.59 (over 18 yrs)
and owe 71000 ,property worth 210,000, can over pay by 5 % each year and then incurr a charge of 6%.
We will be in the fortunate position of being able to pay off about 35000 later this year
My question is , should i just pay the charges and move to a cheaper mortgage (first direct). which would be the best way of reducing interest and penalty payments.Any help would be appreciated

While the children throw their toys at each other lets look at 3 options you have(there are probably more)

1.
Based on 8 years left on the fix and a 16y full term your current payment is around £530pm

Drop the term to 8 years that will lift the payment to £919 so use up around £4800 per year add in you 5% overpayments that will use up some more.

Invest the rest to release over the life of the mortgage.
Are you using your ISA allowances a good time to start filling those.

2.
pay the penalty 6%(don't add it to the mortgage)
£33k @ 6% £1980(£20 spare for a takeaway:))

new mortgage is £33k @5.59 over 8 years £427pm.


3.
Pay the penalty to move £71k @ 6% £4260 -£35k £40260

Fee free base tracker with FD 2.89% over 8 years is £470pm

edit: Cheapest FD is 2.39 with £499 fee that would be £467 ofer 8 years

Thats some rough numbers for 3 options I would want to do it in more detail to check but paying the penalty to move to FD does not look like a good option.


I would look at 1 and 2 in more detail, based on saving rates you could get