Endowment Fixed Rate

sheffjon

I have an endowment mortgage £66500 with 8 years left to run. A couple of years ago I signed up for a 10 year fixed rate at 5.99% so I am currently paying over the going rate. To get out of the fixed rate it will cost me 10% (£6650). My endowments are not performing very well and I am going to have a shortfall of about £7000. I feel that I am being done over by the banks here at every angle . Can anyone give me any advice on what to do?

dunstonh

I feel that I am being done over by the banks here at every angle

I cant see that. You have a long term fixed rate that is nearly 2% below the long term average. Its not much more than current fixed rate deals. I am sure you wouldnt be unhappy if mortgage rates were 10% now.

Can anyone give me any advice on what to do?

Stop feeling hard done by. You chose a deal to give you payment certainty. You seem to think you will save money elsewhere but its probable that you wont or if you do, it will only be a small amount in the short term (and could cost you more in the long term).

You need to a calculation on the cost differences and consider the risk you would be taking coming off a fixed rate like that.

Pigman

My mortgage rate is 5.94%, I fixed if for 5 years and it's up in Sept 2012 - I actually went into it with my eyes open because I wanted to know exactly what my monthly outgoings were to enable me to tackle other debt issues I had - I could look back and say I could have saved money woth a variable rate, but who has a crystal ball eh?

Had the rate gone sky high I would have bene laughing, as it is I was glad of the stability its given me - probably cost me overall, but in a funny way, kinda worth it.

Gorgeous_George

I understand your frustration sheffjon.

My guess is that you need some financial awareness and assertiveness training. You probably succumbed to pressure to go with an endowment without fully understanding the risks. The fixed rate might prove ok over ten years but it won't be as good as the 'less than BofE tracker deals' that some people are fortunate to have. It won't be as bad as the 8%+ rates some sub prime lenders charge to people who cannot move.

The maths is easy. If you can remortgage on a 8 year deal that saves more than £6,650 + Interest over the 8 years then a switch may be worthwhile. Switch to a shorter term and the risk of higher rates in later years needs to be considered.

I'd probably overpay as much as possible while savings rates are low. I'd be surprised if your endowment shortfall is as low as you suggest.

GG

Dan_1976

Dont worry about the rate, you wont save the penalty to move.

I would think about the shortfall. Overpay and if you can maybe change some or all to repayment.

Banks have been doing us all over for a while now!