Early product transfer

PP1984

Hi all,
Perhaps too much time on my hands, but recently I've been considering whether it's worth taking a gamble and switching deals early, paying the ERC.  With the housing market predicted to drop by 13% and mortgage lenders likely to increase rates, if I wait it could be a double hit of being in a higher LTV band and those higher rates. 

The specifics:
House value of £540k - I've called Halifax to confirm this is the current indexed value
Current balance of £435k made of 2 sub accounts:
£415k for just under 32 years, fixed at 2.04% until Jan 21 , with ERC of £3320
£20k for 9.5 years, fixed at 2.07% until Jan 23, with ERC of £600
Current monthly repayment is £1693

I've seen a product transfer rate of 1.42% fixed until July 22, with a product fee of £1499.  A new monthly payment of about £1450.
If I wait, the ERC will be waived starting from November. 
If I switched now instead of November, my crude calculations see me being just under £2400 worse off w.r.t interest and ERC, but at least with a fairly decent rate and a lower monthly repayment to see me through for a while.  I have been furloughed and things could go either way in terms of employment, as it is for many people out there.
I know this is maybe diverging into housing market predictions and that thread is closed, but any thoughts?  And do you reckon my £2400 figure roughly correct?  I've assumed I'll be paying the product fee anyway, whether it be now or in November.

Thanks for any input

dunstonh

With the housing market predicted to drop by 13%

There are also predictions that say it may not drop at all or if it does it will be very short term.  Mainly, lack of housing stock on restart.  There could also be a boost from people bored stiff with being in a house without garden/land or being in the city during lockdown and wishing they were more rural.  That could see selective markets rise and fall.  Bottom line is that you cannot predict what the prices are going to as the market is frozen at the moment. Values are not going up or down.

 and mortgage lenders likely to increase rates,

Why would they increase rates?  Deals may well be reduced in availability and choice but there is no rate pressure.

I know this is maybe diverging into housing market predictions and that thread is closed, but any thoughts

What until the ERC is gone would be my opinion.  Seems pointless paying the costs for the sake of 7 months wait.  Its not as if mortgage deals are going to move much in either direction in the short term.

My_username

@PP1984 have you looked into this any further?

dimbo61

If this was a 5 year deal you were looking at I might agree but paying out £4419 in fees and ERC is madness.
You are also extending the £20K loan by 21 years so even more interest.
Could you overpay 

[Deleted User]

can you remortgage to a new provider?  
If so then you can often do this up to 6 months in advance and have your mortgage offer sitting waiting until your ERC expires.  

That would secure the rate if they went up and would avoid paying those fees

My_username

@Deleted_User
how can this be done please? To have a mortgage offer sitting until ERC expires?

[Deleted User]

you apply for a new mortgage with a new lender. They give you a mortgage offer thats valid for up to 6 months (not all lenders).   You then get the legal work done and the solicitor sits on it until a week before the change date and does the final bits.  

PP1984

Thanks for all the replies.

dimbo61 said:

If this was a 5 year deal you were looking at I might agree but paying out £4419 in fees and ERC is madness.
You are also extending the £20K loan by 21 years so even more interest.
Could you overpay 

I've given my head a wobble and I think you're absolutely right - it is madness, especially for a 2 year deal. 
The 5 year deal on offer is 1.81%, so still a temptation but it all depends on how the next few months pan out with house value, available rates, and my employment status.  I've decided to wait it out, hope for the best, over pay some of it closer to the time and hopefully even get into a lower LTV band by November. 

Deleted_User said:

can you remortgage to a new provider?  
If so then you can often do this up to 6 months in advance and have your mortgage offer sitting waiting until your ERC expires.  

That would secure the rate if they went up and would avoid paying those fees

Unfortunately I don't think this is an option right now.  I am on 70% pay until November (best case) due to COVID impact on my employer.  My wife is self employed and 19/20 profits were only 30% of previous years.  It's a joint mortgage and we have quite a bit unsecured debt.  The various calculators put us way off what we would need with a remortgage.  Also if remortgaging, the 3 month ERC wouldn't be available so would need to remortgage on 1st Feb 2021.

Another thing I've noticed is that the indexed house value takes quite some time to get updated - I think it's every 3 months.  So there is at least some thinking time if the housing values fall.