Right time to fix?

danm

Wanted to get some opinions on the below to make sure I am not missing something.

Due to additional borrowing on different products, my loan is in two parts (currently borrow with Santander)

Loan 1: £116,000; 14yrs remaining; 1.24% (BBR+0.99% for life)
Loan 2: £122,000; 27yrs remaining; 3.09% (fixed rate, 2 years remaining on fix)

My fixed rate loan part (loan 2) has a 5% ERC.

My expectation is that interest rates at some point before mid 2018 are going to rise. I also want to bring down the term of loan 2.

Longer term fixed rates seem to be priced close to historical lows so my plan is to look at a 10yr fix : Barclays currently offer a 2.39% rate which I will take over 15 years.

If I look simply at loan 2, on an ‘as is basis’ it is cheaper (by a few pounds) on a monthly basis to pay the ERC, and move the lower rate – while it is galling to pay the £6,000, this is giving me 10yr certainty over payments for no extra monthly outlay.

In addition rates would only need to rise 4 times over the next 10 years, before the fix starts to be comparable to my lifetime tracker –

All in all, for £200 a month extra, I am locking in for 10yrs and reducing the term on Loan 2 by 12 yrs also.

Does this add up?

getmore4less

you need to start with the 2 year comparison as that is when the ERC stops.

Loan 2: after 2 years
£122,000 27y @ 3.09% £556pm £116,020
£128,000 27y @ 2.39% £537pm £121,073
£128,000 --- @ 2.39% £556pm £120,606

Still around 4.5k behind in 2 years.

if you run the numbers for your current loans for 2 year against the switch of the full amount see how much the difference you owe.



eg for no rate rises in 2 years if you switch the lot to the new deal over 15 years/

£244,000 2.39% £1615 £216,274

split the payment

£116,000 @ 1.24% £755 £100,575
£122,000 @ 3.09% £860 £108,505

Total £209,080. £7K ahead.

with 13years to pay @ 1615pm that's a rate of 2.947%

danm

I actually have no idea what you have said - but thanks for taking the time to post.


I am less concerned about the 2 year cost, and more the longer term expectations on Interest Rates

Boredatwrork

The question I guess is, as and when they go up, how fast will it be. Personally I cant see them doing something too fast, They want stability after all especially with Brexit around the corner.

Crystal ball time.

BTW there are better lenders than santander (and fee free) for the fixed, have a hunt around.

getmore4less

If that base+0.99% in old A&L tracker rate this may be of interest,

https://forums.moneysavingexpert.com/discussion/5683692