Should I remortgage early?

Booge

Hi. I am debating whether to remortgage early for 5 years due to the rate rises and to give me more predictability over repayments. 

I current have around 65% equity in my home and 35% of value of the home is mortgage. So 35% LTV. 

I bought my home in December 2021 with a rate of 0.99% with a loan of £255k. I now owe £248k as of September 2022. I am on a 2 year fixed term with HSBC. I did turn down a 5 year fix on same rate which I wished I had not done, because I thought things might change in the future if I needed to sell the house and I would then need to make early repayment fees. 

the lowest rate I can now access for 5 years is 3.6%. I would need to pay around £3000 to exit the mortgage early and then I would be paying £1,300 per month on the mortgage instead of £962 as I do now. Overall, I would pay around £8000 more over the term of the mortgage than continuing it until January 2024. 

However, i can pay that sum and it would give me a guarantee for 5 years. 

That said I assume these fixed rates are now factoring in future rate rises in any event, so unless inflation expectations/ interest rate expectations get even worse than they are now (which could of course easily happen) I might find that the rates are not much higher in January 2024. 

I calculated the difference in what I might pay from January 2024 if the interest rate on my fix was 5.5% (estimate of how high it might go)and the 3.6% I would get now. And it comes out about the same as the £8000 I would lose by exiting my current deal. 

Any thoughts on what you would do?

Jonathan 

K_S

@booge This thread might help you lay out a few further options to reduce your risk. One huge positive for you is that you're with HSBC, and their pro-rated ERC gives you more flexibility with regard to remortgaging in the final few months than you would with other lenders.

https://forums.moneysavingexpert.com/discussion/6387663/5-year-fixed-coming-to-an-in-oct-2023

Booge said:

Hi. I am debating whether to remortgage early for 5 years due to the rate rises and to give me more predictability over repayments. 

I current have around 65% equity in my home and 35% of value of the home is mortgage. So 35% LTV. 

I bought my home in December 2021 with a rate of 0.99% with a loan of £255k. I now owe £248k as of September 2022. I am on a 2 year fixed term with HSBC. I did turn down a 5 year fix on same rate which I wished I had not done, because I thought things might change in the future if I needed to sell the house and I would then need to make early repayment fees. 

the lowest rate I can now access for 5 years is 3.6%. I would need to pay around £3000 to exit the mortgage early and then I would be paying £1,300 per month on the mortgage instead of £962 as I do now. Overall, I would pay around £8000 more over the term of the mortgage than continuing it until January 2024. 

However, i can pay that sum and it would give me a guarantee for 5 years. 

That said I assume these fixed rates are now factoring in future rate rises in any event, so unless inflation expectations/ interest rate expectations get even worse than they are now (which could of course easily happen) I might find that the rates are not much higher in January 2024. 

I calculated the difference in what I might pay from January 2024 if the interest rate on my fix was 5.5% (estimate of how high it might go)and the 3.6% I would get now. And it comes out about the same as the £8000 I would lose by exiting my current deal. 

Any thoughts on what you would do?

Jonathan