Should we re-mortgage?

manicmum_2

Hi,

Just after a bit of advice! We took out a 10 year fixed rate mortgage with the Woolwich in Sept 2008, just before the rates started to go down. Here are the details,

5.69% with an ERC of 5% of the balance.
92,000 left on mortgage, house is worth about 270,000.
Monthly payments are £711.

Just wondering if it's worth paying the ERC and re-mortgaging to a lower rate, possibly 5 year fixed as we have a good LTV? I know it's hard to know what rates are going to do and if/when they will go up, if only I had that crystal ball! Just thought I would see what you all thought.

Thank you.

originalmiscellany

What will future rates be? Who knows is the simple answer.

5.69% is historically a very good rate, even though you have a good LTV in your property.

Are you a risk taker? What's the cost of the ERC? Can you afford to make the payments currently?

Can you overpay your mortgage at all, e.g. 10% a year? If so would you be in a position to overpay too? This could massively affect how much you pay per month etc.

For what it's worth I think we'll get interest rates up 2 percent by the end of 2012, but that's pure guess work.

Hope this helps, and if you give a bit more info, I'm sure we'll be able to advise you better.

manicmum_2

Thanks for your reply.

The ERC would be about £4,500. We have no problems making our payments. The mortgage allows us to overpay 10% a year but we are not really in a position to do so. We are not big risk takers and like the peace of mind of a fixed rate.

It's just very frustrating to think we could be saving money while rates are so low!

Thanks again.

dimbo61

Right the best 5 year fix at the moment is FD 3.89% and if you put the figures into "whatsthecost" with a term of 17 years? it works out at about £648 a month.( Thats £96600 as the mortgage debt!!)
Over 5 years you would save £3780 but would owe about £1050 more at the end of 5 years unless you kept the mortgage payment the same IE £711 a month, in which case you would have overpaid even more COMPOUND INTEREST.
I have not taken into account the cost to move lender or any fees other than the ERC £4600 that your existing lender might hit you with.