Remortgage now or wait to avoid early exit fee?

psn12345

Hi. Our fixed rate mortgage deal with Natwest ends in August. We are keen to agree a new 5-year fixed deal, whether that's with Natwest or someone else, as we're worried about interest rates jumping up at any moment.

If we want to agree a new deal with Natwest, we can't do that until mid-May or we'll incur a £2,000 early exit fee. If rates do jump and we ended up having to pay £50 per month more compared to a rate we could get right now, that would equate to an extra £3,000 over 5 years. 

Can anyone advise on whether we are better off paying the early exit fee and bagging a good deal now, or should we risk holding out til mid-May to avoid the fee, but risk rates having gone up?

getmore4less

£50pm/£3k  does not tell you what it really costs over the 5 years.

you will need to provide more information

amount owing
current rate
current payment 
full term
rate available today(with the 2k ERC)

psn12345

Amount owing is £218k
Current rate = 2.12%
Current payment = £960 p/m
25 yrs left
Best rates available today are about 1.8%

dimbo61

Why do you think rates will jump up by £50 a month before May ?
Have you searched the market for deals with other lenders ?
You might be able to get a new deal with a different lender 6 months before your current deal runs out.
With that size mortgage I would speak to a broker

getmore4less

lets assume you are going with £999 fee base rates 5y

 

Mortgage	£218,000
payment	£960	ERC/FEE
rate	2.12%	£2,000
new rate	1.80%	£999
Time	Years	months
Left on current	0	5
New fix term	5	0
amount left after(months)		5
Start	rate	End
£218,000	2.12%	£215,115
£220,999	1.80%	£217,847
amount left after(months)		60
£218,000	2.12%	£181,647
£220,999	1.80%	£181,571
Switch when ERC £0
Break even rate needed no fee and fee)		55
£215,115	2.112%	£181,572
£216,114	1.997%	£181,571

You would  need a rate of better than 2%  if you waited against  paying the fee now and going to 1.8%.
Good chance there is something out there that will not require the ERC paying with less than 6 month to be ERC free  

If your ERC has been 1% since Aug 2021 shame you did not start looking last year  when you could have  recovered the ERC in the first year of a new deal.

£50pm is the difference between a 1.8% and a 2.27% over 25y

rate	payment
1.80%	£902.92
2.27%	£952.93

 paying £960 over 5years

amount	rate	payment	owing
£218,000.00	1.80%	£960.00	£178,289.59
£218,000.00	2.27%	£960.00	£183,240.54

~£5k better off

Add a 2k ERC.

amount	rate	payment	owing
£220,000.00	1.800%	£960.00	£180,477.79
£218,000.00	2.270%	£960.00	£183,240.54

still ~£2.7k better off 

amnblog

Nice maths, but the simple answer is ask a mortgage broker to generate a remortgage offer now based on todays rates. Many will last for 6 months.

psn12345

Thanks everyone