Switching to a different fixed-rate mortgage

jpcamps

Hi,

I am 7 months and five days away from my current 2 year fix ending. With a debt left of roughly £104k and a 1% ERC, so ~£1k.

By switching to a five-year fix now (currently just checked current provider, I may be able to get better elsewhere) the rate would actually increase from what it is now on the fixed by the equivalent of roughly £42 p/m. With the £42 per month extra and the ERC of £1k, between now and the current fix ending, I will have paid £1294 (£1k+(7x£42)) extra (compared to leaving it as it is now).

This, on the face of it, sounds stupid to do. However, it is probably going to be cheaper to fix for 5 years now than it is when my deal ends. - i.e. predictions are that the base rate will rise after Q2 next year - and surely banks will likely raise their fixed rates the closer it gets to when the base rate is likely to rise?

Obviously, without knowing what the fixed rate offers are likely to be at the end of my current fix and the fact that I'd have to pay £1k ERC and £42 extra p/m until my current fix ends, do people think it would be prudent to switch now or wait until the end of the current fix?

I know either way is a gamble and that no one can say for sure either, but, any opinions would be greatly appreciated.

Thanks
jpcamps

Pros and cons for each one that I can see:

Change now

Pros
- Possibly get a cheaper 5 year rate now than if waiting until after current fixed period ends
- Rates may (but are unlikely to) increase before the end of the current fix therefore I could be saving even earlier.

Cons
- Will need to pay ~ £1k ERC and £42 p/m extra for 7 months
- Rates may not increase high enough in order to make the £1294 back


Wait until current fix ends

Pros
- Won't have to pay £1k ERC and won't be paying £42 p/m extra for the rest of the term

Cons
- Five year fixed term rate will most likely be higher then than it is now.
- Rate may be high enough that by the end of the five-year fix, I may pay more (over the term of the fix) than the £1294 I'd pay now to more than likely get a better rate.