Paying to come out of mortgage deal before rates go up?

Hello,

I have posted very little on this site and today I started two new threads (the other is in the dsavings part of the website)!!

My wife and I have just entered the final year of our five year fixed rate deal with Natwest. We have a remaining term of seven years and the balance we owe is £70k with a property value of around £130k. We are paying 4.99 on this deal.

There are grumblings about a rate rise and I am considering remortgaging now to fix at a low rate. However, this will cost me £700 to exit the current deal plus any associated costs of remortgaging.

Would the advice be to come out of this deal and fix for three/five years or sit tight until November when I can arrange a new deal without the exit penalty?

As always, any advice will be most welcome.

Replies

  • lilyplilyp Forumite
    270 Posts
    ✭✭
    I don't think interest rates will rise for a while yet. I would see out the year and then look at it.

    However I am not the most knowledgable at this kind of thing.
  • SmlSaveSmlSave Forumite
    4.9K Posts
    Part of the Furniture Combo Breaker
    ✭✭✭✭
    Can you get a new fixed rate that would save you £700 over the term? If you can then its less than a gamble and you're just fixing for a bit longer :)
    Currently studying for a Diploma - wish me luck :)

    Phase 1 - Emergency Fund - Complete :j
    Phase 2 - £20,000 Mortgage Fund - Underway
  • Hello,

    I think you should stay in your current mortgage until it ends. I don't see the interest rates going up. The uk gov has said they are going to keep the rates the same until unemployment falls below a certain level and I think we are about 2 years away for this to happen.
  • cb4fwhcb4fwh Forumite
    158 Posts
    Eighth Anniversary 100 Posts Combo Breaker
    Just because the base rate isn't going up, doesn't mean that fixed rates deals won't.

    Like SmlSave says, you need to do your own analysis based on your own assessment of the risk of rates going up.

    My own view is that if you transfer to a 5 year fix at 2.99% means that you may save approximately £64 per month or £768 over the year - roughly equal to your early exit costs.

    Therefore, if I was you I would just monitor the fixed rates. If they stay as is (as they have done for a while now), I'd stay as-is. If they start to move, then maybe consider exiting early.
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