Fixed rate mortgages that allow you to move home without penalties

davidparfett

Hi,

My current fixed rate mortgage will end soon. It's a lot cheaper to get a fixed rather than variable but I want to sell my house and buy another next Summer.

Most fixed rates have penalties of 1 to 3% if you redeem the mortgage in the first year which means I'd just as well get a variable.

Does anyone know how I can get the benefit of a fixed rate but not pay heavy penalties when I move? I don't mind, say, £500 but £2,000 to £6,000 seems excessive.

Thank you!!!
David

Thrugelmir

Remain with the lender you take the fixed term product with and port the mortgage. Top up with an additional product in order to borrow the total the amount that's required.

Porting simply means that the existing terms and conditions are transferred, i.e. the interest rate, term of the the fix and early redemption penalties.

haras_nosirrah

There is a lender who allows up to a 5yr fix with no penalties for coming out within the 5 years.

glosoli

Just be cautious about signing up to a product with penalties and relying on being able to port because porting applications can be declined.

Brock_and_Roll

The OP needs to understand what a "fixed rate" means to the lender. If a lender advances say £200k on a 5 year fix at 4% - they are in effect guaranteeing that no matter what happens to interest rates, the customers payments remain the same. So if Brexit causes rates to balloon, its the bank's problem.


The bank hedges its risk by taking out interest rates swap agreements. So if a customer wants to break a fix, the bank needs (in theory at least) to break or part-break its IRS agreement.


So if a customer wants to break after 1 year when rates had fallen to say 2%, then the approx. breakage cost would be £200k x (4%-2%) x 4 (years) = £16,000


So whilst the banks have a one way street (if rates have risen the customer does not get a credit), there is a real cost to the bank if rates have fallen.

xyz123

As said, you can port the mortgage subject to valuation and affordability checks.

Not a recommendation but we took out 5 year fix with Coventry earlier in year and it has no ERC.