Advice with regards mortgage renewal

garyh_uk

our mortgage fix ends in May next year 2027. We are currently paying 1.24% and were hoping rates would have got closer to the 2.5/3% mark at renewal next year.

Of course now, things have done a u-turn.

We have a few options to mind and I’d really appreciate people’s thoughts on what you would do -

1. overpay on the mortgage each month and by means of a lump sum so we have a lower amount to remortgage next year and less interest paid each month

2. invest what would overpay in an ISA 3.6% and then put this lump sum towards the mortgage balance at renewal

3. cancel out existing mortgage (pay a £4K early exit fee) and lock in now on a fixed at the current rates we can get which are 4.34%

4. Do nothing and pray things resolve quickly and rates are around 3.5/3.75% next year when we come to renew

or anything else people can think of!

Many thanks

ellenvan

We can't forsee the future, but personally I would go with option 2.

I would definitely not consider option 3.

ACG

I agree with @ellenvan

Jemma01

Option 2 if you know you have the discipline not to spend the money. Otherwise option 1.

born_again

1 or 2.

But that depends on how much you are talking of overpaying.

If not then 4

3 would be just daft. Given rates could easily drop lower than now. You would be chucking £4K down the drain, as well as paying more.

Isthisforreal99

https://forums.moneysavingexpert.com/discussion/comment/81941967#Comment_81941967

Have you got 3 and 4 the wrong way round there?

born_again

https://forums.moneysavingexpert.com/discussion/comment/81941971#Comment_81941971

Opps edited 👍

Windofchange

Same situation for us - April 2027 going from 1.7% now to ?? My take on things is we’re all along for the ride and I’m not going to be paying the ERC to get out of a 1.7% rate early! You can usually secure a deal 4-6 months ahead of time, so we’re looking at September sort of time. My strategy at present is to hold for now and see what is happening in 6 months time. Things may have stabilised or they may not.

Worst case, I’d be surprised given economic headwinds at present if rates went up hugely between now and autumn. The economy is faltering currently and if not for the war rates would be dropping to stimulate things. It is certainly possible they go up, but I don’t think it’s a done deal. If we arrive in September and it’s not looking like any resolution then we will take a view on variable vs 2/5 year fix. We are doing similar to your earlier options re: overpaying but won’t realistically make a huge dent in things in a year.

garyh_uk

Are you overpaying in one hit at the end of your term or each month?

Windofchange

it’ll be each month rather than a lump sum and realistically might total 5k over the 12 months so we’re not talking mega numbers. Ultimately has there ever been a 25 year plus period in time where there hasn’t been some sort of shock? Brought in the 70’s and the late 80’s came along. Brought after that and 2007/08 came along. We brought 2020 and I was counting on something going wrong in between then and 2045! We are thankfully in a very strong position to brace against whatever is coming. Just another thought for your options - how secure are your jobs? If this really does get nasty with full on recession, should you actually be keeping any large deposit in an ISA / savings account to give you the security of being able to meet your mortgage payments should the worst happen rather than overpaying? Maybe you already have an emergency fund or insurance etc but for me I have a large (10’s of thousands) sum in an ISA which will stay there to cover many years of mortgage should I come into difficulty.

ACG

I was on a webinar thing last week with a chief economist from a bank.

His view was that the world is very different to when Ukraine/Russia war started. The jobs market is not great and so unlike 2022 when people were able to more or less demand pay rises, that probably wont happen this time which means inflation is unlikely to bed in like it did then.

In addition any rate rises will take 12-18 months to kick in. The general view is that this war will be well over by then.

I am a mortgage broker, not in any way qualified to give an opinion. I have seen plenty of economists get it wrong also. But I just thought I would let you know what their thoughts were in case it affected your decision making.

Mine is up for renewal in August next year. I paid the ERC on my last mortgage (which I am so glad I did), but not a chance I will be doing it this time.