To pay ERC or wait?

My_username

Hi, our current fixed rate deal (2.99%)  is due to end on in March 21. With rates being this low at the moment I’m contemplating to pay ERC (£1,400) and remortgage early. We would save around £100 a month in repayments  if the circumstances remain the same (we want to reduce the term to 21 years though).  We can get a 5 years fixed at 1.59%. What are your thoughts on interest rates? Will they remain low in the next few months? Anyone with a crystal ball? the longer we can hold on the lower the ERC will be. Also, our LTV is around 72% at the moment. I guess property prices are another factor to consider..

Unicorn_cottage

Have you considered fees? Have you looked at what offers are out there and if they would have a product fee etc? Your current lender should offer you deals about 3 months before your current deal runs out?

[Deleted User]

If you can save the ERC within the period left on the product then there is a decnt reason for doing it.  If not then you need to decide for yourself how much the extra security is worth to you. 

If you applied for a remortgage today you would be really lucky to have it switched over for 1st June. That gives you 10 months at he lower cost.   £100 a month saving would mean you would lose £400 by moving.  

Is £400 a cost you are happy to pay for the security?  I dont think rates will move much for the next year.  But thats me personal opinion and im not paying your mortgage if i am wrong.   Property prices on the other hand might be different and maybe next year you would be above 75% ltv due to a value going down. 
Maybe you can get a cashback deal to cover this £400?  But then again there may also be other mortgage or legal fees to take into account.  

Its not a completely ridiculous idea.  Its just a personal one and based on how much you are willing to pay for more security

Thrugelmir

If you've £1,400 to hand. Might as well overpay the mortgage now and save yourself interest. 

My_username

@unicorn

Thank you. Yes I’ve done my research, spoke to an advisor and considered the fees which may be payable whether I remortgage now or at the end of the term anyway.
My worry is the deal my (or any other) lender offers me in the future will be higher than what’s available at the moment. Hence contemplating to remortgage and incur ERC now. If that makes sense..

@Deleted_User

That’s really helpful thank you. I’m happy to pay £400 to secure a cheaper deal now, as long as the rates will be higher in March ‘21

Considering the overall cost we will incur over the 5 years I roughly worked out that if, in March ‘21 the interest rate available to us is higher than 2.13% it would have been worth remortgaging early. If it’s lower than 2.13% it wouldn’t be financially viable to remortgage early

@thrugelmir

Thank you. I can think of many other ways to spend £1,400 on but I understand..but if the interest rates go further down after I’ve switched then I will have not saved myself interest..