Moving from Fixed to a lower rate- Should I?

oasisfeverish

Am wondering if I would be better getting out of my fixed rate and moving to a lower rate?

I am 3 years into a 10 Fixed Rate at 5.99%. Early repayment charge would be 6% of outstanding balance, plus a final repayment charge of £275.

So based on October Mortgage figures my charges would amount to £3592 to get out.

Have circa £55k O/S, properties being sold approx. £180-200K, so LTV 27.5-30%.

Currently with Barclays and would be happy to stay with them.

Quite happy with the amount I pay monthly of £344.50 and would want this to remain or even increase as I want to overpay by £100 a month for 2011, thus reducing the term on a new deal.

Couple of points to add, I don't have the funds to pay the repayment charges available in a lump sum, and also any new fees would have to be added to the Mortgage as well. Additionally we want to move in 2011 and may increase the mortgage to circa. £100k dependant on property.

Welcome anyone thoughts on this, and experiences of people that have gone through it?

haras_nosirrah

You might want to double check but I believe Barclays won't let you add on any erc to the new mortgage balance. I think you will have to pay this upfront to change your product.

opinions4u

CBI expects interest rates to rise, starting in the Spring.

If you remortgage to, say, a 4% fixed for 5 years there is a possible saving to be made (e.g. 2% x 5 years = 10% minus 6% penalty minus fees). But if the rates are higher than your current rate in year 6 and 7, that could end up costing you more.

Check out HSBC, First Direct, Co-Op and Britannia for decent longer term fixes that are cheaper than you currently pay. Don't be loyal to your current lender for the sake of it, but equally don't remortgage away for short term gain.

I'd probably remortgage based on what you've posted. But it's a close call and fees compared to size of loan are important.

Thrugelmir

oasisfeverish wrote: »

I am 3 years into a 10 Fixed Rate at 5.99%.

That may not be a bad rate in the years to come. Current levels of interest rates aren't going to last forever.

Are you allowed to make overpayments?

oasisfeverish

Thrugelmir wrote: »

That may not be a bad rate in the years to come. Current levels of interest rates aren't going to last forever.

Are you allowed to make overpayments?

Am allowed to make a 5% overpayment of the outstanding balance each year, which is the mortgage year, not calendar year.

So currently could pay an extra £2750 this year. Athough at the moment I am hoping to overpay £100 a month.

Peelerfart

Purely only my opinion.

I would keep what you have and overpay to the maximum you're allowed for as long as you're allowed.

It would not sit well with me to give the bank/bs £3.5K on a relatively small mortgage balance.

Like I say - my opinion only.

Thrugelmir

oasisfeverish wrote: »

Am allowed to make a 5% overpayment of the outstanding balance each year, which is the mortgage year, not calendar year.

So currently could pay an extra £2750 this year. Athough at the moment I am hoping to overpay £100 a month.

If you need to borrow the money to fund the ERC. Then overpaying as you've suggested makes more financial sense.

getmore4less

Whats the followon rate at the end of the fix.

You need to know this to make a fully informed choice.

dimbo61

I would carry on overpaying the 5% allowed and wait and see if you do move next year!
Now if you need to borrow an extra £45K from Barclays next year you will hopefully be able to get a better deal for the extra ( overpay the more expensive part of the mortgage)

oasisfeverish

The follow on rate will be the SVR at time of fixed rate deal finishes on Sept 2017.

Thank you everyone for your input. I will concentrate on making overpayments at a minimum of £100 a month and try to ensure I use all of the 5% entitlement per year.

Does anyone know of a calculator that will show me how much interest I will save by overpaying £100. I know it will cut the term by nearly 11 years, but not the interest.

Gorgeous_George

There is a 'Should I Ditch My Fix Calculator' here which may help you decide if switching is worth it financially.

If it isn't worthwhile and you decide to move, you could port the Barclays mortgage to the new property and borrow any extra that you require on a new deal (either with Barclays or a n other lender). Unlike some people, I do not expect interest rates to rise over the next 4 or 5 years* so a great new deal should be available. If the new deal is cheaper than the Barclays deal, choose interest only and overpay the Barclays product to reduce the expensive debt as quickly as possible.

Good luck.

GG

* This could be wishful thinking on my part as I have excellent lifetime trackers on both my mortgages. It's your money, you decide.