Should I pay ERC of £10500?

Baxter100

So based on that I would go with option 1.

Orchid96

Thank you all for the replies so far. There will be 2 more reviews by BoE before December, but looking at the trend, both could be at least 25% increase in the base rate. The new Prime minister and the policy will surely have an impact on the inflation (positive or negative). Nothing much to do now, than wait :-(

LoomThought

I am in a similar situation but the fixed term of my bigger 2/3 mortgage ends in Sep 24. I have also arranged a remortgage but indecisive about paying the ERC.

If you are on a salary, you can also consider that in a high interest and inflation environment pay rises will also be significant and may balance potential increase in monthly payments. You may get promoted, you can save the £500/month to help future payments etc.

It should be kept in mind that we are going to a full blown recession and there is a limit to potential interest rises.

propertyhunter

Consider whether you can overpay on your current mortgage too, to minimise the ERC should you decide to go down that road. Most mortgages allow a 10% overpayment per year. Of course, you need to have 53k to hand to do that, and then take it back out when you remortgage. 

fewcloudy

Orchid96 said:

Like many others we too are feeling the heat of rate increase, hence managed to get an offer from Barclays in mid July at 3% fixed for 10 years.

The offer is valid until mid Dec, so we are trying to find the best option.

Just to say that fixing at 3% for 10 years is a big commitment, and may bring its own problems further down the line. It might seem like a great rate to you today, but what about 5 years down the line?

I had a friend who was delighted to fix at about 4% for the lifetime of his mortgage (which was about 8 or 9 years) in 2008.  He was regretting it by the end of that year, and all the way to the end.  But like many of us, he had lived through rates of double and triple that, so it just seemed too good to be true, and no-one predicted the following decade would be near zero rates of course.

If you want reassured that spending a 5 figure sum in ERC's is the right thing to do, you've come to the right place. 99% risk averse on here, every day of the week.  Hence why there's been about a million posts since 2008 saying "rates can only go one way, fix now".

Orchid96

propertyhunter said:

Consider whether you can overpay on your current mortgage too, to minimise the ERC should you decide to go down that road. Most mortgages allow a 10% overpayment per year. Of course, you need to have 53k to hand to do that, and then take it back out when you remortgage. 

Unfortunately don't have that option :-(

Orchid96

fewcloudy said:

Just to say that fixing at 3% for 10 years is a big commitment, and may bring its own problems further down the line. It might seem like a great rate to you today, but what about 5 years down the line?

It is a big commitment, hence all these discussions

Orchid96

Orchid96 said:

Thank you all for the replies so far. There will be 2 more reviews by BoE before December, but looking at the trend, both could be at least 25% increase in the base rate. The new Prime minister and the policy will surely have an impact on the inflation (positive or negative). Nothing much to do now, than wait :-(

The policy changes didn't help with the mortgage rates. I am not sure whether I should wait until December now. We have made up our mind to pay the ERC (£10500) and complete the remortgage. Looking at all the recent developments in the mortgage market, not sure what will happen to the existing offers :-(

london21

Orchid96 said:

Orchid96 said:

Thank you all for the replies so far. There will be 2 more reviews by BoE before December, but looking at the trend, both could be at least 25% increase in the base rate. The new Prime minister and the policy will surely have an impact on the inflation (positive or negative). Nothing much to do now, than wait :-(

The policy changes didn't help with the mortgage rates. I am not sure whether I should wait until December now. We have made up our mind to pay the ERC (£10500) and complete the remortgage. Looking at all the recent developments in the mortgage market, not sure what will happen to the existing offers :-(

Existing offers are not affected. 

cx200

propertyhunter said:

Consider whether you can overpay on your current mortgage too, to minimise the ERC should you decide to go down that road. Most mortgages allow a 10% overpayment per year. Of course, you need to have 53k to hand to do that, and then take it back out when you remortgage. 

Would you mind clarifying what you mean by “take it back out when you remortgage”- I’m not quite sure what you mean . Thanks!