Switching fixed rate with early repayment charge

marc-h_2

We have a 5 year fixed Nationwide mortgage deal that comes to an end in December. Our current rate is 1.79% and we have about 90k remaining with well under 60% LTV. The full remaining term is about 14 years. We are trying to decide if we should switch our deal now and pay the £900 early repayment charge so we can move to a new 5 year deal with Nationwide at 2.48% with the start date delayed as long as they will allow.

The concern is rates will continue to rise before we can renew without fees, which we can do from 1st August. I think we should have done this earlier to get a better rate but I'm not sure if is still worth doing now with rates likely to continue to rise. 

I don't think this makes much difference but we also have a 2nd smaller part of the mortgage that is coming to the end of a 1.44% deal in August. This is only 13k and we will either pay it off or switch do a lower rate as we can do that now without charges.

Anyone have any thoughts on what might be the better option or any other options we might not have considered?

CarterUK73

You might find that changing your mortgage with the same lender, they waive the early repayment charge. Might be worth asking them about it?

Thrugelmir

CarterUK73 said:

You might find that changing your mortgage with the same lender, they waive the early repayment charge. Might be worth asking them about it?

ERC's are in place for a purpose. No free lunches in this world. 

marc-h_2

Thanks for the replies. They have confirmed that we will have to pay the erc unfortunately. We have booked an appointment next week to look at switching to a new deal ( they insist on a 90 minute appointment to switch if you have erc's). Still not sure what we will do though.

getmore4less

Work out what rate would break even over 5 new years paying the ERC or waiting.

Thrugelmir

marc-h_2 said:

Thanks for the replies. They have confirmed that we will have to pay the erc unfortunately. We have booked an appointment next week to look at switching to a new deal ( they insist on a 90 minute appointment to switch if you have erc's). Still not sure what we will do though.

Lenders (to protect their own backsides) will perform affordability checks etc. Onus being on them to offer you a duty of care. 

marc-h_2

getmore4less said:

Work out what rate would break even over 5 new years paying the ERC or waiting.

The break even looks to be about a 0.3% further increase on the 5 year fixed rate deal before 1st August. This seems fairly likely but obviously additional base rate rises are anticipated and the current mortgage rates must be partly based on them going up further. The 5 year fixed deal with Nationwide has gone up about 1% since January which is obviously more than the base rate has gone up but I guess it will still go up further if we get further base rate rises 

Thrugelmir

marc-h_2 said:

getmore4less said:

Work out what rate would break even over 5 new years paying the ERC or waiting.

The break even looks to be about a 0.3% further increase on the 5 year fixed rate deal before 1st August. This seems fairly likely but obviously additional base rate rises are anticipated and the current mortgage rates must be partly based on them going up further. The 5 year fixed deal with Nationwide has gone up about 1% since January which is obviously more than the base rate has gone up but I guess it will still go up further if we get further base rate rises 

On the 27th April 2021, 5 year swap rates in the money markets were priced at 0.324%. Currently 2.012%.  Due to current events in the US hardly surprising that that's a rapid speed of change. Money markets being international in nature. 

marc-h_2

Thanks for the responses so far. Still unsure what to do but nobody has a crystal ball to predict what rates will be in a few months. The consensus seems to be that they will continue to rise into next year though.