Remortgage early or wait and see

Bingjamin

Hi all,

Looking for some general opinions on my situation and advice on what others would do in my shoes given the base interest rate increase yesterday.

We are in the annoying position where our fixed rate of 2.5% ends in June 2023, we have a ERC of around £4,700 and about £295k left on our loan. When we purchased we had an LTV for 85%, we may be looking at closer to 75/80% now give the increase in house prices.

Been struggling to do the maths to be honest, given we can't predict where BOE interest rate will be into next year. I am however really worried as are many others about being faced with some huge increases in monthly payments come end of fixed term. Could probably manage a mortage rate of around 5% but anymore than that would be a real struggle. I understand I can lock in a new rate around Feb next year, just a bit concerned about what can happen between now and then.

Does anything thing it will be wise to remortgage early give the high ERC? Ive spoken to my mortgage broker, but he was very unhelpful in which way I should go.

Thanks,
Dan

TheAble

It's very difficult because future rates are so hard to predict. Assuming though that you could switch now to a fixed rate of 3.5% say then you'll be out a guaranteed £7.5k or so (£4700 plus 1% over your current 2.5% for the next year). So you'd need to offset that against your June 2023 base rate prediction and how long you plan to fix for. 

simon_or

OP, it's a fool's game to predict interest rates. You need to go by your mental attitude and what your finances can bear.

If you will have peace of mind by fixing for 5 or 10 years at 3.5% today and will not beat yourself up if rates don't go up a lot or even fall, then go for it.

If your overarching concern is rates going over 5% then it makes sense to fix at 3.5% and the cost you incur for it is the price you're paying to derisk your situation.

Your broker is never going to tell you what to do on this matter, how would they know, their guess is probably as good as yours.

Nailer99

Hi Binghamin,

I’m in a very similar situation. Mortgage at 2% expires in May and also have a hefty ERC of more than 5000. I’ve decided to wait it out and cross my fingers. 2-year Fixed rates now offer the banks best guess of what will happen over the next few years. They are high but lower than 5%. 

It’s going to be a big jump in monthly payments but we just have to tighten our belts. 

oliel

I am in the same position pretty much - but if your rate ends and you go onto the standard rate on 1/6/23 - you are able to select a new rate 6 months before that ie - 1/12/22,  Also if that rate is higher than your current rate the new rate won't start till 1/6/23 if its lower than your current rate it will start 3 months before your fixed rate ends - Most people dont realise that with most mortgage companies you can lock in a new rate 6 months before - check with your mortgage go - the 6 month bit is usually in the small print - Im going to string out till 1/12 and lock in  new rate than - hope that helps.