Should I fix or stay as I am?

Stigofthedump_2

Bit of advice needed please. We have an interest only mortgage with balance of just over £19k. Mortgage is with Nationwide



We're on variable rate of 2.25% and we are paying £1300/month (way over what is required) we have an overpayment excess of around £47k.



I estimate at our current payment rate (intend to continue overpaying as we are) we will be mortgage free in about 16/17 months.



My big question is with the risk of interest rates rising or fixed deals going should I take action with such a short amount of time left to pay off?


i.e. is there a way to fix, get reduced rate on such a short term and not pay any fees?


I've seen a couple of communications about fixing now... this was on the MSE's money tips email headline today
Warning: Cheapest-ever mortgages are disappearing - yet ACT NOW and you could still save £1,000s

thank you in advance for your thoughts expertise and opinions.

AnotherJoe

At the rate you are overpaying, at best I'd have thought it would be marginal, you'd be swapping a (rounding up) 2% rate for one year with a 1% rate for two years and you wont be able to pay earlier due to ERCs. And you'd have to get a bigger mortgage since 19k is too small.

More generally, and looking at a completely different strategy, you are likely be better off going to a cheaper rate (even if borrowing more), slowing down the rate of overpayment (perhaps to zero) , and paying more into your pension. Especially if you are a HRT the payback would be far larger than fiddling with your mortgage rates.

Of course if you already whack in the max to your pension that doesn't apply.

Stigofthedump_2

Interesting hadn't thought of it that way - I am just about into HRT bracket have a money purchase company pension (GSK) which I pay 4% matched by company 8% - perhaps I need to speak with financial adviser to work out best strategy - I just cannot work out the numbers.

AnotherJoe

Stigofthedump wrote: »

Interesting hadn't thought of it that way - I am just about into HRT bracket have a money purchase company pension (GSK) which I pay 4% matched by company 8% - perhaps I need to speak with financial adviser to work out best strategy - I just cannot work out the numbers.

Look at it this way.
Pay £1 off your mortgage and save 2p in interest
Pay £1 into your pension and have it bumped up to £1.40p. Have that grow conservatively at 4% and bump it up to £1.46 and when you withdraw it get about £1.17p

Which is better, 2p or 17p? No calculator needed.