Switch and Early Repayment Charges

daverave7

getmore4less said:

daverave7 said:

getmore4less said:

Be interested in your calculations that show its its worth it.

I calculated how much I would pay back up to January 2027 based on different scenarios: locking in now at 1.14 and locking in on January 2022 at a variety of rates (and including my current rate of 1.74 %).  The locking in now (i.e. by switching) included an ERC of £1700. Mortgage is currently around £160K for 16 years, around 50 % LTV.

The savings I would make over the duration from now up to January 2027, and based on the different rates I might have locked in to on January 2022 are:-

1.14 %  -£1178
1.24 %  -£867
1.34 %  -£476
1.44 %  -£133
1.54 %   £259
1.64 %   £602
1.74 %   £994
1.84 %   £1386
1.94 %   £1729
2.04 %   £2121

So, I would only save money IF rates would increase by 0.4 %, come January 2022.  It's more about having some security for the next 5 years, which might be a bit bumpy!  This is unlike me as I usually gamble!!!

Hope this helps?

You said 14months to ERC free, not 2(Jan 2022)


I think HSBC ERC is now linear on days left at 1% a year.



I prefer the breakeven rate change calculation

on £160k HSBC 5y fix £999 fee products are better than the no fee options.

Using your numbers 

16 years is around £955 round up to £1k

£160,000 
1.74% 14 months then switch or
1.14% £1,700 ERC 5 years

amount	rate	payment	owing
£160,000.00	1.74%	£1,000.00	£149,146.07
£161,700.00	1.14%	£1,000.00	£149,777.16

and 5 years

amount	rate	payment	owing
£160,000.00	1.74%	£1,000.00	£111,892.51
£161,700.00	1.14%	£1,000.00	£109,467.21

rate needed in 14month to break even 3y 10month later
 

amount	rate	payment	owing
£149,146.00	1.27%	£1,000.00	£109,469.97

SORRY... I meant January 2023. I have lost a year somewhere!

daverave7

p.s. I think its unlikely I would get 1.27 % in January 2023, so looks like my decision to switch now is justified (despite a flaw in my calculation)!

The cost over 5 years was more for the fee product mortgage, but I assumed that the (repayment) amount left on the mortgage would be the same at the end of 5 years.... A similar mistake to the flaw in my calculations!

getmore4less

daverave7 said:

p.s. I think its unlikely I would get 1.27 % in January 2023, so looks like my decision to switch now is justified (despite a flaw in my calculation)!

The cost over 5 years was more for the fee product mortgage, but I assumed that the (repayment) amount left on the mortgage would be the same at the end of 5 years.... A similar mistake to the flaw in my calculations!

Common mistake 
A lower rate, even if you use the lower payment, pays off more debt than a higher rate.

it's a feature of amortization that a larger proportion of the total payment is interest the higher the rate and the longer the term(left)

done a handy table 
the proportion of a payment that is capital for some rates and terms

Y\R	05	10	15	20	25	30
00.00%	100.00%	100.00%	100.00%	100.00%	100.00%	100.00%
00.50%	97.53%	95.12%	92.78%	90.49%	88.25%	86.07%
01.00%	95.12%	90.49%	86.08%	81.88%	77.89%	74.09%
01.50%	92.78%	86.08%	79.86%	74.10%	68.75%	63.78%
02.00%	90.49%	81.89%	74.10%	67.05%	60.68%	54.91%
02.50%	88.26%	77.90%	68.76%	60.68%	53.56%	47.27%
03.00%	86.09%	74.11%	63.80%	54.92%	47.28%	40.70%
03.50%	83.97%	70.50%	59.20%	49.71%	41.74%	35.05%
04.00%	81.90%	67.08%	54.94%	44.99%	36.85%	30.18%
04.50%	79.89%	63.82%	50.98%	40.73%	32.53%	25.99%
05.00%	77.92%	60.72%	47.31%	36.86%	28.72%	22.38%