How long to hold on ...

DoubleTop_2

So the bank have held the interest rates again this month and I'm on a base rate mortgage, no ties at 2.5%.

Last year we went for it, four jobs working in many timezones as an IT consultant, money kept aside for the dreaded tax bill but we are close to clearing the mortgage.

I'm considering now setting the term to five years as we can afford that monthly repayment and seeing if we can do that with one of the five year fixed deals, giving me a steady "I know how much I've to pay" feeling. What this does or would do is lock me in and also give me a whopping early repayment fee. At the moment, pretty much all "spare" cash is being overpayed on the mortgage.

My dilemma, lock myself into a fixed amount that I have a definate figure for, or continue as we are now with the ability to overpay. Timing on this one is obviously important with the current interest rate situation.

Just wondering what peoples thoughts are, I'm in a nice place for sure, I know that and have worked very hard to get here. Just one last little push ..... but do I need and should I consider the change?

DT.

ryan86uk

Hi,

What a question to ask! There are too many varying factors to consider to give you a well informed answer. From my personal point of view I would say it depends on how much mortgage you have left, your job security etc etc.

You say you are close to clearing your mortgage, how much? I think a 5 yr fixed rate for someone who is close to being mortgage free is a little too long. You could look at 2 yr fixed if you were so inclined.

My opinion is that i can't see the base rate increasing too much over the next 2 years. Maybe hitting the 2.5% mark in around 18-24th months time? Again, that is my opinion but as you are probably well aware there are too many factors that can influence the BoE base rate. Your and other peoples views may be different though!

If I was in your position and close to being mortgage free I would probably stay on SVR for at least another year. As this will almost certainly be lower monthly payments than a 5 yr fixed! You also don't have the burden of early repayment charges!

Just keep your eye on interest rates every month. You're not locked into anything at the minute, pay as much as you wish off your mortgage and get close to that goal!.

Worst case interest rates rocket by 2-3% this year... your interest rate on your SVR will be around 5-6%. That is only marginally higher than most 5yr fixed rates on the market now. The months at SVR will easily offset that increase!

Hope that helped!

DoubleTop_2

our current term left is ten years, looking at monthly repayment figures since clearing off a few lump sums and getting rid of the second mortgage we can comfortably slice the term to five, without me breaking myself any more with four jobs.

It's the gamble for sure, to lock in now before the rise that is predicted, knowing I'll be potentially paying more but there is something about knowing the exact figures for the next X years that appeals. Thanks for your response, I had been looking at the payment amounts rather than thinking too much about the rates and overall "price" of my mortgage. Time to play with some more figures on the guessing game

DT.