Can I lock in and pay ERC in 6 months?

superstylin

Hello all,

Feeling a bit bamboozled currently so thought I'd try to tap some MSE knowledge!

My fixed rate mortgage of 2.14% with HSBC is due to end on 31st May 2023. The current outstanding balance is £113,000 thereabouts. It comes with an Early Repayment Charge if I was to switch provider early (I can't say exactly what the charge would be as I can't get in contact with any advisor at HSBC but I know it won't be massive, as it was at £1,321 in February 2022 and it decreases throughout the term).

My question is:

Can you lock in a new mortgage offer for 6 months knowing the 6 months will end prior to the end of the fixed rate mortgage and then pay the remaining ERC which will obviously have reduced.

or

Is it that I can only lock in for 6 months before the fixed rate end date, so I can't start looking for new offers until November? (or I suppose I could take a new offer today and pay the current ERC?)

Hopefully that makes some sense!

london21

If staying with the same lender they usually don't wait 6 months but maybe different lenders, if moving lenders then can delay it. 

So your current lender would allow you to swicth few months before current deal ends can apply and the rates usually kick in in few weeks. 

superstylin

london21 said:

If staying with the same lender they usually don't wait 6 months but maybe different lenders, if moving lenders then can delay it. 

So your current lender would allow you to swicth few months before current deal ends can apply and the rates usually kick in in few weeks. 

Hi London21,

Yes so HSBC who I am currently with allow you to switch rates (product transfer) with 120 days left on current deal. Unfortunately I have over 7 months before my deal ends. Interestingly enough though even though you can switch products within HSBC I believe you're still subject to Early Repayment Charge.

My question wasn't really whether lenders will allow me to lock in a deal, as I know this can be done, but rather can I lock in for 6 months to allow the Early Repayment Charge to decrease. This might be better explained in an example!

Example:

Current deal - HSBC 2.14% paying £700 a month

Barclays offer 5yr fixed rate of 5.14% paying £845 a month - if I took this today I would have to pay an ERC of £646 (I've just been advised)

But if I could lock the Barclays offer in for 6 months (taking me to April 2023) then I'd only have approx £80 to pay in ERC (remembering my fixed deal wouldn't end until May)

BUT I don't know if this scenario is possible and instead I have to wait to exactly 6 months before my fixed deal ends before I can organise a lock in?

simon_or

You can do what you've outlined. All Barclays cares about is that you complete before expiry of their offer. You could also switch with HSBC, paying ERC and choose for the new rate to start in 120 days time.

FYI it looks like Barclays rates are going up from tomorrow.

https://forums.moneysavingexpert.com/discussion/6393875/barclays-purchase-remo-and-switcher-rates-going-up-tomorrow-12th-october

london21

superstylin said:

london21 said:

If staying with the same lender they usually don't wait 6 months but maybe different lenders, if moving lenders then can delay it. 

So your current lender would allow you to swicth few months before current deal ends can apply and the rates usually kick in in few weeks. 

Hi London21,

Yes so HSBC who I am currently with allow you to switch rates (product transfer) with 120 days left on current deal. Unfortunately I have over 7 months before my deal ends. Interestingly enough though even though you can switch products within HSBC I believe you're still subject to Early Repayment Charge.

My question wasn't really whether lenders will allow me to lock in a deal, as I know this can be done, but rather can I lock in for 6 months to allow the Early Repayment Charge to decrease. This might be better explained in an example!

Example:

Current deal - HSBC 2.14% paying £700 a month

Barclays offer 5yr fixed rate of 5.14% paying £845 a month - if I took this today I would have to pay an ERC of £646 (I've just been advised)

But if I could lock the Barclays offer in for 6 months (taking me to April 2023) then I'd only have approx £80 to pay in ERC (remembering my fixed deal wouldn't end until May)

BUT I don't know if this scenario is possible and instead I have to wait to exactly 6 months before my fixed deal ends before I can organise a lock in?

Ah ok I get what you mean now.

If switching make sure you put in application as soon as you can to secure the rates as they are constantly changing.

HSBC seems fair then if they reduce the ERC even to months as a lot of lenders have blanket amounts even if just 3 months left before the period they allow without a fee you pay 1% for within 1 year ERC etc.

You can delay the mortgage start date as far as you complete before product expires, a lot of lenders offer valid for 6 months but check and plan accordingly. 

superstylin

simon_or said:

You can do what you've outlined. All Barclays cares about is that you complete before expiry of their offer. You could also switch with HSBC, paying ERC and choose for the new rate to start in 120 days time.

FYI it looks like Barclays rates are going up from tomorrow.

https://forums.moneysavingexpert.com/discussion/6393875/barclays-purchase-remo-and-switcher-rates-going-up-tomorrow-12th-october

Thanks Simon_or, 

Good to know that I have options, I certainly wasn't aware that I could also switch rates with my current provider HSBC before the 120 days (and take the ERC hit). I think I'll be giving them a call tomorrow since HSBC are now coming out top for my circumstances now Barclays are upping their prices. 

Its unbelievable how quickly things are changing. 

superstylin

london21 said:

If switching make sure you put in application as soon as you can to secure the rates as they are constantly changing.

You can delay the mortgage start date as far as you complete before product expires, a lot of lenders offer valid for 6 months but check and plan accordingly. 

Thanks London21

I'd like to get an application in asap though I only completed forms for L&C brokers today and they tell me it's taking 4 days to get a broker to recontact because they're so busy.

I think I may just approach my current provider HSBC and look to switch rates. I'm also wondering whether to ask for an increase in term to take the heat off the monthly payments.