Should I pay ERC of £10500?

id311299

FarmGirl78 said:

If you stick with your 1.24% and rates go up to your predicted 5%

The accuracy of this prediction is what keeps the likes of me and OP awake at night. And gas prices is a very good mention - will it be affordable for the OP to keep up with say 7% interest rates AND the new energy prices from January 2023? For a lot of people the expected monthly energy cost this winter is alarmingly close to what they pay for their mortgage/rent.

Orchid96

You read my mind @id311299. Have been thinking about this almost every night. It is a big mortgage for us and 7% is going to be tight

london21

What makes it unsettling is that no one expected the interest rate jumps and energy prices previously.

I often wonder how everyone is coping with this but then again many do not know the impact until later.

nicmyles

As others have said, you don't need to make this decision now. Every month that passes, we will have more information about where rates are likely to be at the end of your fix. 

I have done a similar thing to you and I'm just going to forget about it until Feb when I need to decide whether or not to go ahead with the ERC and new fix or not. Booking fee was definitely worth paying for the ability to hedge!

Orchid96

nicmyles said:

As others have said, you don't need to make this decision now. Every month that passes, we will have more information about where rates are likely to be at the end of your fix. 

I have done a similar thing to you and I'm just going to forget about it until Feb when I need to decide whether or not to go ahead with the ERC and new fix or not. Booking fee was definitely worth paying for the ability to hedge!

Yes, that is the plan. Will wait until December to make the final decision. 
Why did you choose to pay the booking fee upfront rather than adding it to the mortgage?

fewcloudy

Orchid96 said:

nicmyles said:

As others have said, you don't need to make this decision now. Every month that passes, we will have more information about where rates are likely to be at the end of your fix. 

I have done a similar thing to you and I'm just going to forget about it until Feb when I need to decide whether or not to go ahead with the ERC and new fix or not. Booking fee was definitely worth paying for the ability to hedge!

Yes, that is the plan. Will wait until December to make the final decision. 
Why did you choose to pay the booking fee upfront rather than adding it to the mortgage?

The less you add to your mortgage the better!

But seriously, is there a reason you would want to add any sort of fees onto a mortgage and pay interest on them for the next 25 years or so?

id311299

fewcloudy said:

The less you add to your mortgage the better!

But seriously, is there a reason you would want to add any sort of fees onto a mortgage and pay interest on them for the next 25 years or so?

To my knowledge, this is a trick to ensure that if for whatever reason the transaction (purchase, remortgage, product change, etc.) falls through, you don't end up paying something upfront that you may not get back. If the fee is added to the mortgage, even if you have the money in cash, you will "pay" it only if the transaction is successful. If you have the cash, you just overpay the amount on day one and wipe out that part of the principal, so it accrues no interest.

Orchid96

id311299 said:

fewcloudy said:

The less you add to your mortgage the better!

But seriously, is there a reason you would want to add any sort of fees onto a mortgage and pay interest on them for the next 25 years or so?

To my knowledge, this is a trick to ensure that if for whatever reason the transaction (purchase, remortgage, product change, etc.) falls through, you don't end up paying something upfront that you may not get back. If the fee is added to the mortgage, even if you have the money in cash, you will "pay" it only if the transaction is successful. If you have the cash, you just overpay the amount on day one and wipe out that part of the principal, so it accrues no interest.

This was the reason I asked about upfront payment 

nicmyles

I'll hold my hands up and say I was under the impression that this was a non-refundable booking fee either way, ie would be added to my mortgage if I chose not to pay up front (which I didn't want to do for interest reasons). 

I can see from googling around that that is not necessarily the case, but it's not obvious to me why it would be non-refundable if paid one way and not charged at all the other (if I don't progress with the fix). It's not a new mortgage, so the borrowing for the lender to add the fee to is there regardless of whether I eventually go forward with the new fix or not - I can see the logic for new mortgages where there is nothing to add the charge to if it falls through. 

So have maybe fallen into a trap there, but live and learn.

Baxter100

My gut feeling is that interest rates will go up to at least 4/5%. I also think once they have gone up they won't be coming back down.