14 months left on fixed rate and worried

drlaurawatson

Hi, I've got 14 months left on a Santander fixed rate at 1.84%.  I'm worried that rates could be more like 7% when I have to remortgage which will add about £500 to my monthly payment.  I've got 16 years left on the loan and have been overpaying when I can.  I've asked Santander if they will let me re-fix early as current rates are around 3.4% but they said no, unless I pay the approx £10k ERC.  That doesnt seem worth doing.  Should I carry on overpaying when I can and just wait and see, or calculate out whether the ERC is worth it and gamble on those possible very high rates with recession next year? I suppose I could always extend the term again if I need to but that would be really depressing as I am trying to pay it off as soon as possible.  

nicmyles

I am in a very similar position to you (ERC a bit lower at 7k) and my plan is to (urgently) work through with a mortgage adviser whether paying it to re-fix now is worth it. It will be a gamble if we do, because no-one can really know what interest rates will be in a year, but on the other hand, what price certainty and being able to plan ahead knowing your mortgage will be manageable? I certainly don't think it's a stupid thing to be considering. Honestly if my ERC was 5k or less I'd have already done it.

kassy64

I can’t imagine mortgage interest rates will be anywhere near 7% in a years time, could be wrong but suspect it will be slower than that.

IAMIAM

I doubt they will get to 7%. 

The fact 5 year and 2 year fixes are practically identical in rates and trackers are 1% cheaper on 2 year fixes is telling me bank analysts are projecting a 2-3 year bumpy ride only. I may be wrong. I am going to jump onto the Barclays/HSBC or Nationwide trackers and plan accordingly in January. I doubt the BOE will continue increasing every two months by 0.25% for the next 3 years. 

I suppose it depends on your mortgage amount. Mine is going from £420 to maybe £550 or £600 max on a 60-75 LTV.

But if your mortgage is £1200 going to £1500+ etc and a large mortgage balance. I see the struggle. 

rtho782

I'm similar. We have 10 months to run on our 5y fix, at 2.74%. £174k owing, £298k valuation, 18y10m on mortgage.

Our ERCs are only 1%, so it's starting to feel like it's worth taking the £1700 hit to remortgage now and lock in 3.09%, even though it means paying more, as in 10m I think we could be looking at a LOT more.

drlaurawatson

IAMIAM said:

I doubt they will get to 7%. 

The fact 5 year and 2 year fixes are practically identical in rates and trackers are 1% cheaper on 2 year fixes is telling me bank analysts are projecting a 2-3 year bumpy ride only. I may be wrong. I am going to jump onto the Barclays/HSBC or Nationwide trackers and plan accordingly in January. I doubt the BOE will continue increasing every two months by 0.25% for the next 3 years. 

I suppose it depends on your mortgage amount. Mine is going from £420 to maybe £550 or £600 max on a 60-75 LTV.

But if your mortgage is £1200 going to £1500+ etc and a large mortgage balance. I see the struggle. 

Thanks - a 2-3 year bumpy ride only could be the  worst of all for me - if I wait til Oct 23 to remortgage as I'd take on a high rate for 5 years most likely and then watch rates fall again!

I've got a 210k loan over 16 years with a monthly repayment of 1274, at 1.84%

drlaurawatson

rtho782 said:

I'm similar. We have 10 months to run on our 5y fix, at 2.74%. £174k owing, £298k valuation, 18y10m on mortgage.

Our ERCs are only 1%, so it's starting to feel like it's worth taking the £1700 hit to remortgage now and lock in 3.09%, even though it means paying more, as in 10m I think we could be looking at a LOT more.

yes, absolutely, unless anyone thinks mortgage rates wont go up much beyond 3.5 for longer than a year , this looks likely to be a winner although I know nothing about these things but I think your sums are easier than mine!

datlex

My  fix is due to end in a year, but I have been over paying when I can to hopefully bring down the LTV as much as possible.

fergie_

I'm in a similar boat with with 2.2% fix ending at Xmas 2023. A lot can happen in a year (as we have already seen) so I will just sit, wait and watch. It is pretty much a gamble whether rates will continue to rise, stick or fall back. A fix gives you surety, but not so good if they did fall back once the inflation fire is put out.

However, I completely agree that overpaying / paying off a chunk at the point of remortgaging is the way to go. On that note, rather than paying an early redemption penalty now, would you be better off paying a lower rate of interest plus overpayments and effectively taking the redemption penalty off the balance at the point you need to remortgage?

Sistergold

I am in a similar position with my tracker product ending 2023. In my humble opinion next year will not be a good time to fix as we might just be at the pick of things. Either way I would not want to pay an ERPC to fix now as to be honest no one knows. Next year as the interest rates will be higher I expect I will still fix another discounted tracker as trackers tend to be cheaper. Since I did not fix when rates were lower I just now have to not fix now and hope for the best. This approach is definitely not for everyone I know but I hate fixing and prefer the ups and downs to reflect whatever is going on. This is biting me at the moment I must say. 

RelievedSheff

drlaurawatson said:

IAMIAM said:

I doubt they will get to 7%. 

The fact 5 year and 2 year fixes are practically identical in rates and trackers are 1% cheaper on 2 year fixes is telling me bank analysts are projecting a 2-3 year bumpy ride only. I may be wrong. I am going to jump onto the Barclays/HSBC or Nationwide trackers and plan accordingly in January. I doubt the BOE will continue increasing every two months by 0.25% for the next 3 years. 

I suppose it depends on your mortgage amount. Mine is going from £420 to maybe £550 or £600 max on a 60-75 LTV.

But if your mortgage is £1200 going to £1500+ etc and a large mortgage balance. I see the struggle. 

Thanks - a 2-3 year bumpy ride only could be the  worst of all for me - if I wait til Oct 23 to remortgage as I'd take on a high rate for 5 years most likely and then watch rates fall again!

I've got a 210k loan over 16 years with a monthly repayment of 1274, at 1.84%

Why not just fix for 2 years if rates are high when you come to remortgage? Or take out a tracker mortgage?