Fixed rate up in June 2023 but should I remortgage now and pay ERC?

random789

We are currently on a fixed rate with Nationwide (2.04%) which ends in June 2023. To remortgage now, we could fix for 5 years at 3.34% with Nationwide but would have to pay the early repayment charge of £1400. I appreciate no-one knows what the interest rates might be when we can look at remortgaging next year but do you think this could be worth doing?

Any advice is much appreciated.

id311299

If you value predictability of cashflow - fix now, and consider any future losses (if this turns out to be a bad deal) in the same way as insurance on which you never claimed, for example (you pay and all you get for your money is peace of mind). Banks do spend (r.e. reduce their profits) on hedging their risk by buying mortgage fix swaps, so why shouldn't we, the consumers, do the same?

If your outstanding principal is small enough to make monthly payments affordable even with catastrophic rate rises - you can consider risking and staying put. My ERC is close to £6k and I am about to pay it and fix for 5 years at 3.15% (or even slightly higher rate, as rates go up really really frequently). I'd rather burn £6k now and retain my sanity rather than rely on politicians and "independent" BoE to ensure my mortgage will be affordable mid to long term. If rates go back down to zero - fine, I have lost £200 a month. If they go through the roof, it is a catastrophe.

Throughout my life I have only regretted decisions where I did NOT do something. I have rarely regretted a conscious decision to DO something, even if it turned out not to be the best one.

CarterUK73

If you’re remortaging with the same lender they may waive the early repayment charge so that could be worth looking in to. 

As for interest rate movements, while no-one can predict the future, they look to be increasing. If you like stability, then fix and you’ll know how much you’ll be paying regardless of interest rate changes for the lifetime of your fix.

CLJ2986

I chose to pay my 4.5k one to give my peace of mind. My 2 year fix was up July 23, but I'm remortgaging to a 5 year fix with a lower interest rate as financial stability is really important to me and I didn't want to risk my house if interest rates rise to a level we couldn't cope with. You have to make the choice that's best for you, while no one can accurately predict the future, for me with young kids I don't need the stress of worrying.