Another 'what to do' mortgage question

hieveryone

Hi all, 

Hoping for some clarity to my thinking. Starting to get tetchy re: rates and thinking of paying penalty and moving to another deal. 


Current:  2 year fixed at 1.54% - ending June 2023. 


Offered 2 year fix at 3.85% or 5 years at 3.59%. 

LTV is 45%. Remaining mortgage is £148k. No plans to move.



Thanks in advance. 

AndyJR

I'm in a similar position of deciding how long to fix, though just doing a rate transfer rather than having to pay a ERC.  

There is no right answer as who knows where rates will be in 2 or 5 years. If I was in your position though and set on paying the penalty to get out the existing fix term, for piece of mind I think I would plump for the full 5 years. 

Good tactic might be to overpay if you can before you move deals, than after a few years of the next mortgage the ERC as a % of the original drawdown won't be that much, giving you options at that point as well to move if rate fit the floor again. 

Genuinely interested to know what you decide! 

Windofchange

Seems little point in your case. Mortgage offers are usually valid for six months (sometimes 9), therefore you can secure a new deal around December / January time which is a few months away. It’s certainly possible that rates could increase again this year, but what is it going to cost you to pay the ERC to get out? 

To work out if it’s worthwhile you’d need to take this amount and compare it to the extra you’d have to pay if rates increased. Say it costs you 3k to get out of your current deal, would you end up paying more or less than this over the course of the new deal? To do this, I’d look at your current offers of 3.85 or 3.59 and then say increase these to 4.5 or 5%, or whatever you guess they might be in the new year which is all we can do. I don’t think you’ll find that you are going to save much if anything when you run the numbers. 

MakingUpGround

Windofchange said:

Seems little point in your case. Mortgage offers are usually valid for six months (sometimes 9), therefore you can secure a new deal around December / January time which is a few months away. It’s certainly possible that rates could increase again this year, but what is it going to cost you to pay the ERC to get out? 

To work out if it’s worthwhile you’d need to take this amount and compare it to the extra you’d have to pay if rates increased. Say it costs you 3k to get out of your current deal, would you end up paying more or less than this over the course of the new deal? To do this, I’d look at your current offers of 3.85 or 3.59 and then say increase these to 4.5 or 5%, or whatever you guess they might be in the new year which is all we can do. I don’t think you’ll find that you are going to save much if anything when you run the numbers. 

Can mortgage offers be pulled once offered? 6 or 9 months is a long time lender wise when the rates are changing so much? 
Planning ahead as our fix doesn't end for 12 months and we have a high early redemption fee (5K) 

london21

The 5 years rate you have might not be available later.

Check the numbers to see if worth paying the ERC or waiting until you can move without a charge.

will go for 5 years for a bit of certainty. 

Windofchange

MakingUpGround said:

Windofchange said:

Seems little point in your case. Mortgage offers are usually valid for six months (sometimes 9), therefore you can secure a new deal around December / January time which is a few months away. It’s certainly possible that rates could increase again this year, but what is it going to cost you to pay the ERC to get out? 

To work out if it’s worthwhile you’d need to take this amount and compare it to the extra you’d have to pay if rates increased. Say it costs you 3k to get out of your current deal, would you end up paying more or less than this over the course of the new deal? To do this, I’d look at your current offers of 3.85 or 3.59 and then say increase these to 4.5 or 5%, or whatever you guess they might be in the new year which is all we can do. I don’t think you’ll find that you are going to save much if anything when you run the numbers. 

Can mortgage offers be pulled once offered? 6 or 9 months is a long time lender wise when the rates are changing so much? 
Planning ahead as our fix doesn't end for 12 months and we have a high early redemption fee (5K) 

Well technically yes they can, but in reality not likely unless they found something adverse you haven't declared or you lose your job or something along those lines. When an offer is made on remortgaging you have a contract that is valid until whatever expiry date is cited. That expiry date will be generally speaking six months down the line. 

mose_2

Who is that with, and any fees on the 5 year fix? 

CSL0183

hieveryone said:

Hi all, 

Hoping for some clarity to my thinking. Starting to get tetchy re: rates and thinking of paying penalty and moving to another deal. 


Current:  2 year fixed at 1.54% - ending June 2023. 


Offered 2 year fix at 3.85% or 5 years at 3.59%. 

LTV is 45%. Remaining mortgage is £148k. No plans to move.



Thanks in advance. 

You should try and snap up that 5yrs @ 3.59% ASAP, it might have already went. 

It’s likely that the BOE are going to intervene and raise rates due to the give away last week, £ plummeting, Gilts up. If they don’t intervene you can expect rates to rise steeply at the their next meeting which is due 3rd Nov, the following one 15th December. They are predicting 4% by the end of the year and 6% by the middle of next. 

froomer

So our fixed rate is due to expire May 2023. The cost of the penalty for 175k is 1k. Now in process of moving mortgage to 5yr fixed and rolling in the penalty. Going to be paying an additional £150 per month, so have reduced some luxuries to offset that. Bit of a pain but can relax for 5 years.