Should I pay fine and re-mortgage now?

kwmlondon

Hi. I took out a first-time mortgage in 2011. It was locked in at 4.1% until January 2016 and is with Newcastle. In August last year I moved house and added a second loan that is fixed until summer 2015.

so now I have the following loans (as of today)

Big mortgage £100,100
Small mortgage £70,000

The monthly payments are £1030.
My take-home wage is £2300 but my partner pays £350 towards that

If I redeemed the mortgage now I'd have to pay about £5k. If I waited until January next year it would be £4k.

When I took out the mortgage I was on £46k a year, I'm now on £40k a year.

Should I re-mortgage NOW to get a locked in rate of about 3% and take the £5k hit, wait until January to see what the rates are then or just stay until the term of the second mortgage comes to an end in Jan 201 and hope rates have not gone up beyond 3% by then?

What are your thoughts?

pogg000

Try this calculator

http://www.moneysavingexpert.com/mortgages/fixed-mortgage-calculator

amnblog

Before you pay 3% to get a rate of 3% I suggest you get some advice from an independent broker.

kwmlondon

I'm waiting to hear back from my IFA, but it all hinges on how much interest rates may rise and when. If I leave it until the end of my mortgage term I'm gambling on interest rates not going up that much. If I re-mortgage now I'm gambling on rates going up more in the next year. Tricky. What would you do?

amnblog

is your IFA a medium?

kwmlondon

amnblog wrote: »

Before you pay 3% to get a rate of 3% I suggest you get some advice from an independent broker.

I know, but it's the difference between paying 3% on a £170,000 debt now versus saving 3% over the 5 years of the mortgage which would be a massive relief, knowing what the payments will be.

There's affordability too.

At the moment mortgage rates are about 2.5% above the bank rate. If interest rates go up to 5.5% then that's only about 1.5% more than I'm paying at the moment so it's affordable, but would this be realistic?

I know many people on MSE have been round the cycle before, is it realistic to expect to be able to get a rate of about 5-6% if interest rates go up to 3%?

I'd value people's thoughts on this....

Many thanks!

kwmlondon

amnblog wrote: »

is your IFA a medium?

No, I think he's a L or an XL but I never peeked at his label.

He won't know what rates are going to do, but he'd be able to do the number crunching in different scenarios which is why I'm throwing it open...

What do people think is the most likely scenario? All the reports I'm reading are suggesting that rates won't rise this year, but are likely to before the election

I've heard talk of 3% being the new "norm" in the future, but is there any basis for this.

If I lock in my mortgage at 3% NOW for the next 5 years at least that gives me 5 years of certainty and I tell you this - right now peace of mind would be worth paying for....

ViolaLass

I wouldn't have thought they're going to go up that quickly and £5k is a lot!

kingstreet

Pre-crash, September 2007, I was "peddling" 6.33% fixed for two years when the C&G SVR was 7.75%.

Nationwide 6.48% fixed for two years, SVR 7.24% in October 2007.

MOTWYW.

kwmlondon

ViolaLass wrote: »

I wouldn't have thought they're going to go up that quickly and £5k is a lot!

Yup. £5k is a lot, but if I get a 3% deal now the payments are £931 a month. If rates go up to 5.5% then my monthly payments will be £1133 a month. Over 5 years that's £12k or thereabouts.

Or is my maths totally out?

I'm floundering here....

kwmlondon

kingstreet wrote: »

Pre-crash, September 2007, I was "peddling" 6.33% fixed for two years when the C&G SVR was 7.75%.

Nationwide 6.48% fixed for two years, SVR 7.24% in October 2007.

MOTWYW.

Handy - thanks. What was the BOE interest rate? It would be good to know in general terms how high the lending rates are compared to the base rate (forgive me if I'm using the wrong terms, it's not my stock-in-trade this).