Sorry for ANOTHER ERC question but ... (8 months, £1.6k ERC)

B0bbyEwing

Our deal (N/wide) ends Sept '23
N'wide tell me I can move to a new deal with them as early as May '23 "which will start as early as July '23"
My ERC is £1,594 "approx as of today".

House valuation is probably in & about the £220k-£230k based on recent sales in the area.
£79k left on mortgage.
21 years left on mortgage currently.


Now I'm very weary people generally don't seem to like being asked to polish their crystal ball but on reading similar threads, I see consistent talk of a peak of around 6% some time next year, so based on today it in theory shouldn't get much more than that by <insert some point here> next year.

Question from me really is, since I can't do a thing without charge until May '23 (and then it'd have to be with Nationwide - later if I switch elsewhere), to pay the ERC or not?

My only 2 previous deals have both been 5 year fixed. I just saw one individual going in to the numbers with a member & I started getting a migraine as I was trying to keep up :-|


I ran a calculator on Nationwide and got these results.

But still not sure if paying up early is a good call or not.



And if the answer to that is no then the follow up question is - is it worth overpaying (think I can do up to 10% without charge)?

I saw one member saying they're doing that in the build up to the end of their deal. Thing is, for us, that would have to come from the retirement pot contributions (in the sense of, rather than sending extra cash to retirement, it would then go to the mortgage overpayments. Retirement pots would continue to be contributed to, I just feel not enough).

london21

If you want certainty can fix now with ERC otherwise wait and see.

Play with the figures, depends on your need for certainty etc.

In the short term will be high buy don't know what 2024 will be like.

B0bbyEwing

And the angle of overpaying for the remaining 12 months (rather than putting to retirement for this time period)?

Asked about that kind of thing recently-ish and the feedback was retirement ... but that was before these rates started jumping up and wondered if that really made a difference or not (even though my existing mortgage deal is obviously a consistent 3.19% until next Sept)?

IvyFlood

Very similar to us, also Nationwide, 1.4K ERC as of this Saturday! (our 5 year fix ends 30 Sept 23)

I was actually on the phone to them yesterday as id assumed they'd but their rates up in anticipation of the BOE rate in November but the advisor told me they've been putting their rates up every week for the past 4 weeks! Whether that's true or not...

We have an appointment with a broker next week to see what we can get if we remortgage elsewhere with a better deal, we are prepared to pay the ERC as I like piece of mind!

Our situation does vary slightly in that we are TTC and I wouldn't want that to affect our mortgage next year.

CSL0183

B0bbyEwing said:

Our deal (N/wide) ends Sept '23
N'wide tell me I can move to a new deal with them as early as May '23 "which will start as early as July '23"
My ERC is £1,594 "approx as of today".

House valuation is probably in & about the £220k-£230k based on recent sales in the area.
£79k left on mortgage.
21 years left on mortgage currently.


Now I'm very weary people generally don't seem to like being asked to polish their crystal ball but on reading similar threads, I see consistent talk of a peak of around 6% some time next year, so based on today it in theory shouldn't get much more than that by <insert some point here> next year.

Question from me really is, since I can't do a thing without charge until May '23 (and then it'd have to be with Nationwide - later if I switch elsewhere), to pay the ERC or not?

My only 2 previous deals have both been 5 year fixed. I just saw one individual going in to the numbers with a member & I started getting a migraine as I was trying to keep up :-|


I ran a calculator on Nationwide and got these results.

But still not sure if paying up early is a good call or not.



And if the answer to that is no then the follow up question is - is it worth overpaying (think I can do up to 10% without charge)?

I saw one member saying they're doing that in the build up to the end of their deal. Thing is, for us, that would have to come from the retirement pot contributions (in the sense of, rather than sending extra cash to retirement, it would then go to the mortgage overpayments. Retirement pots would continue to be contributed to, I just feel not enough).

Pay the ERC and get out. You’ll come back to this thread next year and kick yourself if you don’t. 

B0bbyEwing

IvyFlood said:

Very similar to us, also Nationwide, 1.4K ERC as of this Saturday! (our 5 year fix ends 30 Sept 23)

I was actually on the phone to them yesterday as id assumed they'd but their rates up in anticipation of the BOE rate in November but the advisor told me they've been putting their rates up every week for the past 4 weeks! Whether that's true or not...

We have an appointment with a broker next week to see what we can get if we remortgage elsewhere with a better deal, we are prepared to pay the ERC as I like piece of mind!

Our situation does vary slightly in that we are TTC and I wouldn't want that to affect our mortgage next year.

Yeah I was in two minds whether to respond on your thread before posting this as I saw how similar our cases were. 

What's TTC?

It's ok people saying run the numbers but I'm not sure how they come to these figures tbh so I don't actually know whether we're talking huge differences or minor differences or what.

CSL0183 said:

Pay the ERC and get out. You’ll come back to this thread next year and kick yourself if you don’t. 

What makes you say that?
Apologies if this is wrong but it came across as a sort of, sod it I'll just pick one side of the coin & say that just to pick a side if you get me?

We would be looking to fix in for a time again. I'm leaning towards another 5 rather than a 2/3. 

Thing is, it's whether paying up £1.6k PLUS locking in for 5 years on a deal is likely to be cheaper than riding out the next 8 months (& going with Nationwide) or 12 months (& going with someone else) and THEN fixing.

TheAble

Say rates are 3% higher in July. Then over 5 years you would pay around £12.5k extra in interest than if you fix today.

Less your ERC, less the lower interest you'd pay on your existing fix between now and July if you stay put. So call it 10k extra overall?

Assuming of course all these rate hikes come to pass which they may not. You'll need to use your own judgement on how likely you feel that to be.

CSL0183

B0bbyEwing said:

IvyFlood said:

Very similar to us, also Nationwide, 1.4K ERC as of this Saturday! (our 5 year fix ends 30 Sept 23)

I was actually on the phone to them yesterday as id assumed they'd but their rates up in anticipation of the BOE rate in November but the advisor told me they've been putting their rates up every week for the past 4 weeks! Whether that's true or not...

We have an appointment with a broker next week to see what we can get if we remortgage elsewhere with a better deal, we are prepared to pay the ERC as I like piece of mind!

Our situation does vary slightly in that we are TTC and I wouldn't want that to affect our mortgage next year.

Yeah I was in two minds whether to respond on your thread before posting this as I saw how similar our cases were. 

What's TTC?

It's ok people saying run the numbers but I'm not sure how they come to these figures tbh so I don't actually know whether we're talking huge differences or minor differences or what.

CSL0183 said:

Pay the ERC and get out. You’ll come back to this thread next year and kick yourself if you don’t. 

What makes you say that?
Apologies if this is wrong but it came across as a sort of, sod it I'll just pick one side of the coin & say that just to pick a side if you get me?

We would be looking to fix in for a time again. I'm leaning towards another 5 rather than a 2/3. 

Thing is, it's whether paying up £1.6k PLUS locking in for 5 years on a deal is likely to be cheaper than riding out the next 8 months (& going with Nationwide) or 12 months (& going with someone else) and THEN fixing.

Your mortgage is due to finish at the peak (according to the experts). The peak is predicted to be around 6% BOE BR which will see you come out of your current mortgage and be hit with 8-9% mortgage rates. 

Go look at Nationwide mortgage rates tonight to see what you would get if you were eligible to remortgage today. Look at this with the current BR at 2.25%. Now add another 3.5% to that. 

The Fed are at 3.25% and Americans are up in arms with interest rates above 6% now. We are a couple of months behind the US but in a lot worse position given our very weak £. 

Why would you want to wait 8 months to find a 8-9% interest rate. What do you do then? You come back to this thread and you beat yourself up about it. 

How much per month is your current mortgage? How much per month would it be with the rate you would get today from Nationwide? Then calculate how much it will be at 7/8/9% rates in 8 months time. Calculate how much extra per month that will cost you. The difference might pay for that ERC in 1year. You then “win” after month 12 to month 60. The alternative is you save that ERC and ride it out. You go onto an 8% rate and after 12 months you’ve used up that ERC and you’re still locked into that term for the next 4 years essentially being thousands worse off. 

It’s crystal ball stuff for sure but what makes you think you will be able to beat what the experts are telling you?

There’s Covid recovery, there is the Ukraine, the energy crisis, the unfounded tax cuts, there is the very weak £, there is high inflation. There is literally not a hope in hell this is a short term issue and everything will be back to normal in 12 months time when your mortgage expires. 

Add to that, the low base rate days are gone, never to return. Having base rates as low as 0.1 / 0.25 / 0.5 / 1 etc is a statistical anomaly. We have been programmed to think this is the norm; it’s not. Historically they are averaging much higher and this was a freak period. That has ended now and likely never to return. Once it does peak, it will come down slowly sure but the new norm may be a BOE BR around the 2.5-3.5 mark. 

Living in hope is great and maybe it’s in your character to be risk averse but there are so many red flags and warnings that yes, I think you would come to regret waiting out another 8 months.

B0bbyEwing

CSL0183 said:

It’s crystal ball stuff for sure but what makes you think you will be able to beat what the experts are telling you?

Nothing...because I don't know what the experts are saying. I pay little attention to the news. Not that I go out of my way to ignore it, I just don't seek it. Just whatever is on the TV in the morning at the gym or as I quick look on my phone at headlines. 

I have looked in to this kind of thing before as well as similar things & the advice has generally been stay as you are.

This time I thought - I can see this rising some. As in quite a bit some. I could be wrong. I'll hop on MSE and see what those more knowledgeable than me say. Fully expecting another - stay as you are because of XYZ - with a well laid out reason as per normal.

So when jump ship came the reply, I didn't expect it as it tied in with what I was thinking already ... and I usually think wrong.

CSL0183

B0bbyEwing said:

CSL0183 said:

It’s crystal ball stuff for sure but what makes you think you will be able to beat what the experts are telling you?

Nothing...because I don't know what the experts are saying. I pay little attention to the news. Not that I go out of my way to ignore it, I just don't seek it. Just whatever is on the TV in the morning at the gym or as I quick look on my phone at headlines. 

I have looked in to this kind of thing before as well as similar things & the advice has generally been stay as you are.

This time I thought - I can see this rising some. As in quite a bit some. I could be wrong. I'll hop on MSE and see what those more knowledgeable than me say. Fully expecting another - stay as you are because of XYZ - with a well laid out reason as per normal.

So when jump ship came the reply, I didn't expect it as it tied in with what I was thinking already ... and I usually think wrong.

I’ve been following the mortgage market carefully the last few weeks and coming on here (just like you are now) and when so many people are asking the same question and coming to the same conclusion then it gives a little confidence you’re thinking along the right lines and following your gut instinct. There has been thread after thread after thread on here all asking the same thing and I would say 90% appear to be bailing out, paying the ERC and trying to secure a fix before things get bad. (The last week has been bad due to the base rate rise and then the mini budget tax cut package shocking the markets and plunging the £)

Saying all that, no one really knows and everything is just guesswork. I would just say follow your gut instinct. You can ride it out and it may work out as nowhere near as bad as what everyone is saying. 

ElwoodBlues

Numbers wise, I'm in a broadly similar position here. I've ran it all through a huge spreadsheet. Currently on 2.4% and Natwest are offering me a 5yr fix at 4% today. By my calculations, if mortgage rates this time next year are 4.5% then I'm about break even with bailing out now. If rates are at 5% next autumn then I'm about £1300 worse off (over the next 5 yrs). If mortgage rates go up to 6% (and stay there), then I'll be about £3800 worse off over the next 5 years. 7% and it's £7600 worse, 8% and it's £11000

So the benefit is rather sensitive around the 5-6% mark - beyond that it's increasing fairly linearly, but the numbers are getting large!

So what it comes down to is taking a chance on what rates are going to do around that critical 5-6%. The headlines keep talking about 6% next year, but is that base rate, mortgage rate, or rate of fixes on offer? Is it scaremongering by the main stream media?

And what are the chances of mortgage rates going above 6%? For me that's just about affordable, but many, many other people have much larger mortgages and the costs are going to cripple them. There will be repossessions, people selling up, and house prices crashing. Would the govt/BoE really let interest rates get that high?