Dilemma

bfgun

I have set a target to be rid of my mortgage within the next five years.

I am currently on a variable of 1.49% and with the overpayments and one-off lump sums I have made I will be mortgage free within five years.

However, if interest rates rise so will my mortgage end date if I don`t overpay by the equivalent amount of the rise.

My mortgage provider is offering a 5 year fixed rate at 3.94% with a £99 fee.

If I take this offer I will have to up my payments by another £128 per month but will clear my mortgage within the 5 year target.

If you were in the same position would you take this offer or just stay as you are?

I have no idea when and by how much interest rates are likely to rise within the next 5 years and if they stay below 3.94% I presume I would be better staying with what I have.

Appreciate any advice - thanks.

limpy-jim

Oh difficult to know - I am currently on a 3.95% fixed rate for 5 years ( started June 2009). It suits us as we have young family to need the certaintly of payments but every ones situation is different. I suppose it also depends on what rules they have on overpayments. Our previous fixed rate we could make 10 % ( in total) o/p all year but it was only credited in January, so you were loosing out on int. My new fr I can pay up to £499 every month ( which is credited immediatly) and also 10% of outstanding balance in January ever year . I have worked out if i pay the max o/p I can reduce term from 19 years to 5! I am 4 months into my challenge and have knocked 6 months off already!

LilacPixie

Only you can choose. your 1.49% rate, i'm presuming its a BOE tracker plus .99%?? If so BOE base rate would need to rise to 3% for you to be paying that rate. No idea on your own circumstances and i don't have a crystal ball but with so much bad news like the public sector cuts, SMI being cut etc I cannot see the BOE raising rates anytime soon.

bfgun

Thanks for your reply. I think 20% overpayments per month are allowed but I would not currently be able to repay anywhere near this amount. Good luck with your challenge.

bfgun

Thanks for your reply. Yes it is 0.99% above base so I am paying a very low rate at the moment. Best wishes with No3!

LilacPixie

thank you BFGUN. There is a calculator on the mortgages/homes tab that allows you to compare specific mortgages. Maybe you should go have a play about with that using yor specific circumstances and see if it helps you with your choice

RosieTiger

That's a personal choice between how much you are willing to risk the variable rate potentially rising against the known value of a fix. Effectively, to me your comparing whether to risk manage or not and only you can decide on that. Knowing something for certain is nice, but it's coming at a price.