TSB remortgage - ditch that fix ?!

Dave360180

Hi all !

I'm looking to ditch my fix and can anyone check my maths please ?  The new TSB fixes of 1.19% is cheap !

CURRENT FIX - HALIFAX
Mortgage debt = £257,700
Interest rate = 1.94%
5 years fixed until September 2023
Repayments £1,300 pcm
Early repayment charge £7,400

OFFER FIX - TSB 
Interest rate 1.19%
5 years fixed
Product fee £1500
Legal and valuation fees £500

SCENARIOS AT SEPTEMBER 2023

SCENARIO A - STICK WITH HALIFAX
Interest paid over 30 months = £11,900
Ending mortgage debt = £230,800

SCENARIO B - DITCH THAT FIX
Interest paid over 30 months = £7,200
Early repayment charge = £7,400
Additional fees £2,000 x 2.5 years remaining = £1,000
Mortgage debt = £226,100

SCENARIO B SAVES £1,000 (LOWEST DEBT PLUS COSTS)

PS - ignoring cashback of £300

Thrugelmir

On a very rudimental basis. If it's costing you (7,400 + 2000) £9.400 to save interest of (11,900 - £7,200)  £4,700 where's the saving?  You will be out of pocket by £4,700. 

Might as well continue to overpay your existing mortgage. 

Dave360180

Thanks for the reply.
The saving is in the debt owing. So the mortgage balance is a lot lower in Scenario B. Does that make sense ? Hopefully that helps. Easy to forget the capital bit !

tigsly

Have you put your details in here https://www.moneysavingexpert.com/mortgages/fixed-mortgage-calculator/

This will tell you 'how low' the rate needs to be for the fix to be worth it.. 

 It suggests the 'new rate' needs to be 0.75% for the switch to be worth it - If you can overpay - that is a far better bet!

getmore4less

Rough Max interest savings is
Difference in rate * amount * time.
0.0075 * £260k * 1.5  say  £3k

Not sure where you get your numbers from

£260k 2% 18m is £7,800 in interest.

Dave360180

tigsly said:

Have you put your details in here https://www.moneysavingexpert.com/mortgages/fixed-mortgage-calculator/

This will tell you 'how low' the rate needs to be for the fix to be worth it.. 

 It suggests the 'new rate' needs to be 0.75% for the switch to be worth it - If you can overpay - that is a far better bet!

The calculator doesn’t work very well. I don’t think it accounts for the capital balance. Has anyone verified what it does ? My figures are based on Excel FV and CUMINT functions. Overpaying isn’t necessarily better !

Dave360180

getmore4less said:

Rough Max interest savings is
Difference in rate * amount * time.
0.0075 * £260k * 1.5  say  £3k

Not sure where you get your numbers from

£260k 2% 18m is £7,800 in interest.

Cumulative interest is more though if you work it out. 

getmore4less

Of course September 2023 is 31 months why do you have 18?

getmore4less

Max saving over 31 months is around £5k with a 0.75% difference in rate.

Dave360180

getmore4less said:

Of course September 2023 is 31 months why do you have 18?

Good spot 30 it is. 

getmore4less

ok working with
£257,700
ERC £7,400   (3%?)
1.94%
1.19%
30months 
£1,300pm
I make that around 19y11months full term
which gives these 2

amount	rate	payment	owing	interest
£257,700.00	1.19%	£1,211.59	£228,602.51	£7,250.32
£257,700.00	1.94%	£1,300.79	£230,543.41	£11,867.17

not far off your numbers
One issue seems to be you have not accounted for the £7,400 ERC you either need to add it to the ditch or overpay the current to do the comparison.

Your two options stack up when you add the ERC and make the payment the same as

amount	rate	payment	owing
£265,100.00	1.19%	£1,300.79	£233,511.07
£257,700.00	1.94%	£1,300.79	£230,543.41

£3k better off staying where you are.

If you wait and switch in 30 month there will probably still be fees.
Accounting for them now or then gets a little more complicated if you want to extrapolate past 2.5 years with guesses of the rates then for another 2.5 years.

One issue with Halifax is their retention deals have been hidden as they are per customer  but they were tiered and under £250k there is(was?) a higher rate, not their best.

doing a quick example(make payment £1,300)
adding the ERC and £2k fees in 5 years if you switch

amount	rate	payment	owing
£267,100.00	1.19%	£1,300.00	£203,140.21

products switch in 2.5years add £2k of fees then to break even over the ditch now you need this

amount	rate	payment	owing
£232,544.00	1.76%	£1,300.00	£203,155.68

drop the fees to 1k 

amount	rate	payment	owing
£231,544.00	1.95%	£1,300.00	£203,168.79

NO fees

amount	rate	payment	owing
£230,544.00	2.14%	£1,300.00	£203,176.95

Current Halifax rates seem to be below that range and loads of 60% LTV deals available

Where do you see rates in 2.5 years is the question to be asking and a change now only protects from any rises for a further 2.5years.


If planning payments bigger than £1,300 you need to run with those.

one other note.
The ERC does not look quite right as it is usually a full x% if that drops to 2% in 6 months run those numbers.