Long term fixed rate - worth escaping?

Forever_Skint_3

Heres' hoping that someone can give me some advice, in 2007 I switched to a 10 year fixed deal 5.25%, offset mortgage. Obviously I am paying well over the odds for this now, but it has a get out clause of approx £1700.

The mortgage is due to run until 2022, there is £47,000 balance and a another secured loan on the offset of £12,500, I am currently paying £800 PM off the main mortgage and £250 PM off the secondary loan and have an offest sum of approx £10K - but I intend to spend this on some work on the house, so soon there will be no off set.

Any ideas as to the most cost effective way to re-organise?

Forever_Skint_3

Just realised I hadn't added that the outstanding mortgage and extra loan are approx 20-25% of house value.

somethingcorporate

Rates are only going in 1 direction and that is a great rate for such a long term fix.

I would sit tight and just put all your spare cash into your offset account.

BadgerFace_2

Honestly, 5.25% for a 10 year fix is not bad at all.

You probably wouldn't beat that today. You could fix for 2-3 years and save significantly, but you have to weigh up two things-

-Will the ERC be worth paying and still leave me better off?

-Will I be kicking myself in 3 years time when I end up on an SVR of (who knows, but maybe) 6~8% and all that cash I saved is rapidly flowing down the river?

Long term, 5.25% is a very good rate, be careful to weigh up putting short term gain ahead of long term savings and stability.

Meeper

If you had a mortgage of something like £150k+, then paying a penalty of that size might be worthwhile, however any improvement in interest rates that you could get from the change would only have a minimal effect on such a small mortgage size.

Stick with what you have.

adwat

I would be very happy with your situation. A ten year fix gives you peace of mind more or less to the end of your mortgage term. Interest rates can only go up from where they are now so in a year or two you will start to feel the benefit of your fix - in several years you may well be feeling very smug when interest rates are back to 7% (say) and your mortgage is well under what other people are borrowing for -which will be 8% variable (say). Use the offset to your advantage in the meantime and you will see your interest payments decrease as well.

Hope this helps you to make your mind up.

Forever_Skint_3

Thanks for the replies, I guess I'll just keep paying off £1000+ Pm (and lump sums as and when), I'm trying to pay it off by the end of the fixed term in 2017, I think I should be on course if I stick at it.

I could pay more, but I like holidays, meals out etc. so they stay.