Pay penalty to renew mortgage or leave it?

JustAnotherSaver

* House bought: £157k
* Left on mortgage: £91.6k
* Can renew: end of Aug '18 (5yr term is up 30/11/18)
* I asked the lender back in November 2017 what the penalty would be regards switching and the figure was £4.6k. Not sure what it'd be today - i'd need to ask.
* Anything else you may need to know to answer my question then just ask & i'll try my best


I've read the MSE newsletter a little late this week but noticed the slot about mortgages https://www.moneysavingexpert.com/latesttip/?weeklytip=18-07-2018&utm_source=MSE_Newsletter&utm_medium=email&utm_term=17-Jul-18-9953&utm_campaign=nt-highlights&utm_content=3#mortgages and how the 'experts' seem to think the rates will rise really soon.


I can renew 3 months before the term is up without penalty & i'm booked in with our IFA at the end of Aug to discuss this. I think our rate is currently 3.19% if memory serves right which was really good back when we took it out.


I've no idea how soon these rates are 'supposed' to be rising or what they should rise to. This is the first time we'll be coming to renew so we're still pretty new to all this.


For those more experienced & knowledgable - what would you do here? Look at renewing even earlier or still just ride it out & as soon as end of Aug comes just lock in with a good rate at that moment in time at no extra charge?

JustAnotherSaver

I've just tried to run a calculator and something i should ask...


We have credit cards with a good few thousand on them. We have the money in the bank to pay these off but while the rate is still 0% we just leave it sitting there & the plan was to clear it in full come the time.


As we'll be renewing our mortgage at some point in the next few months anyway, be it August or earlier, is it best to pay the credit cards off in full early so that there's not so much outstanding debt or since we've enough in savings to cover it would you just leave it?

getmore4less

If you go retention you don't need to worry about the CC.

Better to have the cash at hand so you can play with your LTV if needed at renewal.

The issue with paying to get out is the recovery period on any deal you get over waiting.

Easy calculations, once you have some of the details, to work out what the rate rises would need to be to make you worse of switching early.

With only a month to go recovering any fees will need a really good deal from a new lender.

sparkey1

Who is the mortgage currently with.

AnotherJoe

The last time you fixed for a long time your guess (or your following advice of what pundits generally said would happen) as to interest rate movements didn't work out so well.


This time, by guessing again and taking a penalty for not waiting a few months, I suspect the same thing would happen, you'll have paid a big penalty for something that didnt happen indeed the reverse happened, rates dropped.



Brexit negotiations are currently a car crash, the last thing thats going to happen in the midst of this mess is rate rises, since a weaker pound is about the only way of propping up the economy and whatever happens after its sorted is still likely to be a honking big mess and the UK economy will need higher rates like we need a hole in the head.


So i suggest you go with my guess instead and either remortgage onto a shortish fixed rate period with current lender, where no penalty applies, or wait until November and take your pick from the market at that time. If your current lender is generally competitive you might as well do it now (eg effectively if you remortgage with the same lender the penalty period will be over by the time you've done it)

JustAnotherSaver

getmore4less wrote: »

If you go retention you don't need to worry about the CC.

Does that mean if i stay with my current lender? I wont know until i meet with the IFA who we're going with tbh.

sparkey1 wrote: »

Who is the mortgage currently with.

Nationwide

AnotherJoe wrote: »

The last time you fixed for a long time your guess (or your following advice of what pundits generally said would happen) as to interest rate movements didn't work out so well.

Not totally true but i see where you're coming from.


The last time was also the first time & we decided that we wanted to go fixed regardless. We wanted the security of knowing XYZ was going out each month for the next 5 years while we got used to running a house & everything that went with it. It was the cheapest 5 year fixed deal at the time but there were cheaper non-fixed deals which we could've had. We didn't take it out thinking rates would go up or down really, we took it out because we wanted consistency for 5 years.

the last thing thats going to happen in the midst of this mess is rate rises

So you'd say then that the MSE newsletter last week was wrong in your view?

sparkey1

Ive never had a mortgage with Nationwide, so I assume they like most... but not all lenders will send you a letter inviting you to go online and select a new deal. I have quite a few mortgages, and generally speaking, you are better off just sticking with the current lender who will have a few deals, that dont require tonnes of paperwork, and no credit checks. I renewed one with Santander only yesterday. Click, click done in 5 minutes. As the rate is better they apply it early. Up until 3 days ago we were moving. If we hadn't srted the process of moving I would have renewed with Santander 2 months ago when they sent the letter. Because then my rate would have been 1.89% from 2 months ago, not from tomorrow. Nationwide probably do the same. Or you could wait to the end of August and pay your broker a nice fee for a new deal.

I would second Another Joe. The Bank of England will not raise interest rates before Brexit. If anything they might panic and drop a quarter of a point. An interest rate rise of any description is not going to happen.

JustAnotherSaver

sparkey1 wrote: »

Ive never had a mortgage with Nationwide, so I assume they like most... but not all lenders will send you a letter inviting you to go online and select a new deal. I have quite a few mortgages, and generally speaking, you are better off just sticking with the current lender who will have a few deals, that dont require tonnes of paperwork, and no credit checks. I renewed one with Santander only yesterday. Click, click done in 5 minutes. As the rate is better they apply it early. Up until 3 days ago we were moving. If we hadn't srted the process of moving I would have renewed with Santander 2 months ago when they sent the letter. Because then my rate would have been 1.89% from 2 months ago, not from tomorrow. Nationwide probably do the same. Or you could wait to the end of August and pay your broker a nice fee for a new deal.

I would second Another Joe. The Bank of England will not raise interest rates before Brexit. If anything they might panic and drop a quarter of a point. An interest rate rise of any description is not going to happen.

Thanks for the reply.


If there's going to be no interest rate rises then why are MSE putting this kind of stuff in their newsletter....

The cheapest new mortgages (for new & existing mortgage-holders) are getting more expensive largely because there's been a growing consensus among analysts that the Bank of England will put interest rates up in August, with one poll finding 80% of economists expect a rise.

A quote from the link i provided.


Now i'm not trying to say that MSE newsletters basically state exactly what the future will be, but why are these people who are supposed to be in the know expecting a rise if we're not going to get a rise?






I should really see what the IFA will charge just for renewing. I remember last time round he said they had some deals exclusive to them that wouldn't be available to Joe Bloggs on the street that were quite cheap. He showed me on his computer screen though i don't think the Nationwide one was one of the deals.


What would you expect an IFA to charge for this service?

AnotherJoe

JustAnotherSaver wrote: »

Thanks for the reply.
If there's going to be no interest rate rises then why are MSE putting this kind of stuff in their newsletter....
A quote from the link i provided.
Now i'm not trying to say that MSE newsletters basically state exactly what the future will be, but why are these people who are supposed to be in the know expecting a rise if we're not going to get a rise?

Because "people in the know" essentially, aren't (if they were, they would be fabulously rich and not writing newsletters for MSE )


Back in 2014 pretty much "everyone" (except as it happens my daughters mortgage adviser) and that includes all the same folk saying it now, was saying rates were going to rise. They fell.

JustAnotherSaver wrote: »

I should really see what the IFA will charge just for renewing. I remember last time round he said they had some deals exclusive to them that wouldn't be available to Joe Bloggs on the street that were quite cheap. He showed me on his computer screen though i don't think the Nationwide one was one of the deals.

What would you expect an IFA to charge for this service?

My daughters mortgage adviser didnt charge. Some do. So not necessarily any charge at all.

JustAnotherSaver

Out of interest, this 'St James Place' - is it linked to mortgages as well or just pensions?


The company i go with now seem to be promoting this St James Place on their website. It was never there before. I contacted them last year i think it was regards retirement planning & they started talking about this St James Place but when i read up about it online the feedback was quite negative - mostly concerning the costs.

getmore4less

Nationwide are a good lender(from a customer service point of view etc.)

Decent competitive retention rates.

Chances are there will be no need to change and go through the hassle.

<60% LTV NW no fee rates are 2y 1.94%, 5y 2.19%

you will see better rate with fees.

with the ability to switch early waiting a bit to switch will need better rates than that.

..........................................
The rates can only rise mob have been saying this for getting on for 10 years, one day they will be right.