Should I pay to end my fix early?

Mark_84

I currently have £165,000 left on my mortgage which the current fix rate of 2.34% ends in September 2023.

I can see rates of around 3.7% still available for 5 or 7 years.

I would need to pay £8,200 early repayment Charge. Likely I would need to add this to the new mortgage.

I have calculated my monthly payments will be lower even with the mortgage amount increasing to £173,000 and locking in around 3.7% than risking 5/6% on £165,000 in maybe 6 months time.

I should be able to afford the monthly payments should it hit 5/6% luckily but was trying to plan what to do for the best.

Fromdownwest

That seems like a veyr hefty exit penalty.
How much are you paying at the minute.

£8K additional borrowing plus interest on £165k mortgage, is a lot.

I would engage with a broker to run some comparisons for you, how are the repayments lower for more on a higher interest rate?

CSL0183

Mark_84 said:

I currently have £165,000 left on my mortgage which the current fix rate of 2.34% ends in September 2023.

I can see rates of around 3.7% still available for 5 or 7 years.

I would need to pay £8,200 early repayment Charge. Likely I would need to add this to the new mortgage.

I have calculated my monthly payments will be lower even with the mortgage amount increasing to £173,000 and locking in around 3.7% than risking 5/6% on £165,000 in maybe 6 months time.

I should be able to afford the monthly payments should it hit 5/6% luckily but was trying to plan what to do for the best.

In the last year of a fixed rate mortgage, the ERC is usually 1% so would be £1,650 charge. Are you sure it’s £8,200? 

Normally if it’s a 5yr fix for example, year 1 would be 5%, year 2 would be 4%, year 3 would be 3%, year 4 would be 2% and year 5 would be 1%. I would double check that. 

I think the consensus is if you are in your last year with a 1% ERC then it’s probably worthwhile exiting and fixing now. Expert predictions of 6% BOE BR by middle of 2023. 

PK_London

I'm not sure if anything less than 4% is available at the moment. You could use that £8.2k to pay down your mortgage somewhat if you did have it. If you spread that £8.2k over 5yrs that's £136 a month or £1632 a year. If you equated that to interest then its like you sign up for 5yrs@ 3.7% but with the £8.2k you're paying 4.7% when you factor in the ERC.

However that calculation doesn't factor in the fact you'd pay only 2.34% for the next 12 months so its probably closer to 5% in net terms. I'm not sure if that helps!

WebsterR

Hi, looking for a bit of advice on a similar situation. My current fix is ending in December and I have a mortgage offer on a new fix to remortgage to. 
Am i safe to allow this to progress or should i pay the early exit fee to get onto the new deal asap. 

Rural_Life

Hi, looking for advice (yes I will look into accredited financial advice but this thread is for normal options in the mean time). 

Bought a house, mortgage circa £150k, 2.09% 5yr fix. 

Have OP regularly and currently sitting at £125k and 1yr left on the fix.

When bought me and partner bought worked 40hr weeks (full time) now we only work part time (covid opened our eyes) 25hr weeks each still afford to OP etc but now worried about affordability checks as a result. 

1% ERC as into final year of fix.

Would you:

Bail, pay the 1% and look to fix

Or:

Wait it out until end of fix

Mark_84

Fromdownwest said:

That seems like a veyr hefty exit penalty.
How much are you paying at the minute.

£8K additional borrowing plus interest on £165k mortgage, is a lot.

I would engage with a broker to run some comparisons for you, how are the repayments lower for more on a higher interest rate?

The current monthly payment is £645 based on 30 year’s remaining. I am overpaying that to £845 though.

The mortgage is with Santander. I did find it odd the early repayment charge hasn’t decreased.

I phoned them yesterday and quoted that figure. Not sure if they checked or not but might be worth me rechecking…

london21

WebsterR said:

Hi, looking for a bit of advice on a similar situation. My current fix is ending in December and I have a mortgage offer on a new fix to remortgage to. 
Am i safe to allow this to progress or should i pay the early exit fee to get onto the new deal asap. 

December 2022?

Will your new rate last till after December will you need to pay ERC or could avoid paying this and still mortgaging?

Are you staying with the same lender or moving to another provider.

If you can re-mortgage now with current lender without ERC worth considering as rates are increasing. 

CSL0183

WebsterR said:

Hi, looking for a bit of advice on a similar situation. My current fix is ending in December and I have a mortgage offer on a new fix to remortgage to. 
Am i safe to allow this to progress or should i pay the early exit fee to get onto the new deal asap. 

Same as me; mines runs out 30th November. My existing 2.3% rate will run to then and on the 1st Dec change to the new 3.5% rate. 

You get the choice whether to adopt the change straight away or let it run. In this case, it’s best to let it run and then supersede to the new rate when the original expires. 

WebsterR

london21 said:

WebsterR said:

Hi, looking for a bit of advice on a similar situation. My current fix is ending in December and I have a mortgage offer on a new fix to remortgage to. 
Am i safe to allow this to progress or should i pay the early exit fee to get onto the new deal asap. 

December 2022?

Will your new rate last till after December will you need to pay ERC or could avoid paying this and still mortgaging?

Are you staying with the same lender or moving to another provider.

If you can re-mortgage now with current lender without ERC worth considering as rates are increasing. 

The new offer can be claimed at the end of November being transferred over on 1st Dec, therefore avoiding the ERC.
This is an offer with a different bank, which is well below that of any remortgage offer i can currently get due to the rises.
My main issue is whether the new offer may be withdrawn and whether it is just easier to push things along and pay the £1,000 ERC.

CSL0183

Rural_Life said:

Hi, looking for advice (yes I will look into accredited financial advice but this thread is for normal options in the mean time). 

Bought a house, mortgage circa £150k, 2.09% 5yr fix. 

Have OP regularly and currently sitting at £125k and 1yr left on the fix.

When bought me and partner bought worked 40hr weeks (full time) now we only work part time (covid opened our eyes) 25hr weeks each still afford to OP etc but now worried about affordability checks as a result. 

1% ERC as into final year of fix.

Would you:

Bail, pay the 1% and look to fix

Or:

Wait it out until end of fix

If the experts are right and base rate will increase to 6% by middle of 2023 then you are looking at 8% interest rates for your next remortgage. 

With a reduced income this may prove to be an impossibility on the affordability checks. 

If it were me, I would be bailing out, paying the £1250 ERC and fixing for 5yrs before the next rate rise by the BOE. 

The risk you take I suppose.