Pay ERC and fix at current rates, or stay put

id311299

Apologies for digging out my old thread, but I thought it might be useful if I share what happened with my early product switching.

I have paid an ERC of £5800 and a product fee of £999 and got a 5 year fix with my existing lender (Barclays) at 3.15% which has already started. The ERC of the new product is 2% (it was 3% for the previous one) so there is a room for improvement if interest rates go in reverse. We will likely end up a couple of thousand worse off than the ideal scenario, but this is small potatoes in the grand scheme of things, and overall we are happy - peace of mind is priceless.

fewcloudy

id311299 said:

Apologies for digging out my old thread, but I thought it might be useful if I share what happened with my early product switching.

I have paid an ERC of £5800 and a product fee of £999 and got a 5 year fix with my existing lender (Barclays) at 3.15% which has already started. The ERC of the new product is 2% (it was 3% for the previous one) so there is a room for improvement if interest rates go in reverse. We will likely end up a couple of thousand worse off than the ideal scenario, but this is small potatoes in the grand scheme of things, and overall we are happy - peace of mind is priceless.

Seems a high price to pay for peace of mind to me, but it's not about me!

So if I've understood you correctly, you are suggesting you might pay an ERC again, to get out of this new product if rates were to fall again?  If so, why did you choose a new product that came with an ERC?
*It's been a few years since I last needed a mortgage, so forgive me if such a thing no longer exists.

Kendall80

id311299 said:

Apologies for digging out my old thread, but I thought it might be useful if I share what happened with my early product switching.

I have paid an ERC of £5800 and a product fee of £999 and got a 5 year fix with my existing lender (Barclays) at 3.15% which has already started. The ERC of the new product is 2% (it was 3% for the previous one) so there is a room for improvement if interest rates go in reverse. We will likely end up a couple of thousand worse off than the ideal scenario, but this is small potatoes in the grand scheme of things, and overall we are happy - peace of mind is priceless.

I had a similar choice to make about 6 weeks ago. I could've payed my ERC of £3000 and fixed for 10 yrs at 2.84% to completion. I chose not to proceed. Looking at the rate switch offers today shows me I made a big mistake. I still have 1 year to run on current deal, at the end of which rates available to me (<50% LTV) could easily be 5%+. This leaves me with a new choice. Use 80% of my early-retirement-wannabee savings to pay off the mortgage in full or continue with business as usual paying 15k+ more in interest to the lender over the next decade.

Orchid96

fewcloudy said:

Seems a high price to pay for peace of mind to me, but it's not about me!

So if I've understood you correctly, you are suggesting you might pay an ERC again, to get out of this new product if rates were to fall again?  If so, why did you choose a new product that came with an ERC?
*It's been a few years since I last needed a mortgage, so forgive me if such a thing no longer exists.

If you are looking for a product with out ERC, the rates are high. In the current market, no one is expecting the rates to come down in next 2 years, so paying an additional 1% for a no ERC product may not be the best option when your ERC is only 2%. In case OP can find a new product after 2/3 years for less than 2.15%, paying the ERC again may be a good idea. It all depends on the total cost of the mortgage over the repayment term and when you have a big mortgage every 1% rate change is going to be difficult. Me too having the same situation as OP and can completely agree with his statement "peace of mind is priceless". 

id311299

Orchid96 said:

fewcloudy said:

Seems a high price to pay for peace of mind to me, but it's not about me!

So if I've understood you correctly, you are suggesting you might pay an ERC again, to get out of this new product if rates were to fall again?  If so, why did you choose a new product that came with an ERC?
*It's been a few years since I last needed a mortgage, so forgive me if such a thing no longer exists.

If you are looking for a product with out ERC, the rates are high. In the current market, no one is expecting the rates to come down in next 2 years, so paying an additional 1% for a no ERC product may not be the best option when your ERC is only 2%. In case OP can find a new product after 2/3 years for less than 2.15%, paying the ERC again may be a good idea. It all depends on the total cost of the mortgage over the repayment term and when you have a big mortgage every 1% rate change is going to be difficult. Me too having the same situation as OP and can completely agree with his statement "peace of mind is priceless". 

Thanks, this pretty much says it all!

The current SONIA swap rates are approaching 4% for 5 years and 4.5% for 2 years, and this is BEFORE the BoE announces another hike, which will be either 0.5 or 0.75 pp. I have based my decision on the expectation that in Q2 an Q3 of 2023, which is when my previous fix was ending, we are looking at morgage rates of 4% for trackers and 5.5% for longer term (5+ years) fixes.