Opinion on ditching fix

Engeroosi

I have a "hypothetical" scenario I would like peoples opinions on.

Nov 1st outstanding balance 123k @ 6.29% fixed for another 2 years. Keep paying this until fixed rate is up. Can overpay 10% per year.

OR

Nov 1st outstanding balance 123k ERC of 2% which is ~2400. Switch to HSBC 80% LTV tracker at BoE + 2.49%. No fees. Can overpay as much as you want without, can fix at any point on another mortgage if desired.


What are everyones thoughts on this situation?

Engeroosi

Nobody has an opinion on this then?

SimbaSimon

6.29% is quite a high fixed rate so it might be worth it depending no if you fancy gambling on interest rates. Have you tried the mortgage 'ditch my fix' calculator? According to that with your figures you need a mortgage rate that's below 4.99% to save when you calculate in your ERC. The new mortgage would give you a rate of 2.99% so your start saving straight away, and aslong as interest rates don't rise over 2% in the next 2 years your onto a winner. Should rates shoot by 5% then obviously you'd lose out, but I don't think that's likely to happen soon in my opinion.

Engeroosi

Thanks Simba2k, I would think that interest rates will rise but not fast enough to rise more than 2-3% before end of 2013 in which case I would be on to a winner as you say. That was my opinion. It is nice to be re-assured by others who may be more knowledgeable than myself when it comes to Interest rates.

There is always the option of fixing once the rates do start to rise with no ERC in future which is good to know.

dimbo61

What you need to do is overpay with the money you will now be saving each month
So if your mortgage payment drops by say £100 a month you need to overpay this for the next 2 years ( 24 months ) in order to make up for the ERC fee>
Dont forget other costs when moving lender