To beg for some mortgage advice

[Goldenbrowns]

DH and I are going round in circles and he is getting more and more stressed and I am getting more and more confused.
I’ll try to explain the best I can:

A few years ago before covid, war and craziness we took out a 5 year fixed rate at a decent, low rate.
The fixed rate doesn’t end until next October
We have to pay a £4000 fee to get out of the mortgage any earlier
Currently the best rate we can find to fix at is 3.5%
I think DH has worked out that rates only have to to up to 4% before it’s worth paying the early redemption fee.
So do we cut losses and change mortgage now or hang on and risk getting a worse rate?

It’s worth mentioning that we are fortunate to be able to afford higher rates if necessary as this was always a consideration when buying the house and we can spread it over longer if necessary but we both hate wasting money and it’s messing with DH’s head. He’s already kicking himself for not fixing for longer before hand.

Id really appreciate any advice from those in the know.

Mortgage offers only last 6 months at the moment. Base rate will go up in 2 weeks by another 0.5%.

We are waiting to buy a house stuck in probate. Our original mortgage was 1.04 for 5 years (Nov 2021). Had to redo in April and got 2.10, offer runs out end of sept and then our broker said it will be over 4%. We are so stuck as our original offer was very generous based on a low mortgage rate. We may now have to pull out or revise our offer having waited almost a year - it's a nightmare.

If it's only £4k I would fix now. By next October it could be over 5% or more. Inflation will need to start dropping fast for interest rates to stabilise and that is just not going to happen.

Depends on the size of your mortgage etc but I'd def consider doing it for 3.15 rate because I think rates will go up and that isn't a particularly high rate. How long for though? 3,5,10years?

A crystal ball is exactly what I need! Or a Time Machine to go back and fix for longer!

Maybe just have to accept that we had it good for quite some time-we had a tracker for the period of low rates and now it’s our turn to pay more normal prices.

My Fixed rate if 1.84% had another 3 years but I’m already worrying about when we come to renew it.

A broker is a good idea as we got our mortgage using one, didn’t cost us anything and got a great deal.

Make sure you speak to your current lender directly to see what they offer.

I had to refix recently and the rate and term they offered (10 year fix , no fees and no early repayment charges) wasn't on their website and not even available to the broker I spoke to at L&G (who got me the last 5 year fix). Interest rate was a tiny bit higher than other fixed terms with ERP's but I need the flexibility to move/pay off early and it's not significant amount extra if I don't sell or move.

Also there are very few good deals on 10 year fixes and locking in for that long with high ERP's seems too risky, given life circumstances can always unexpectedly change.

Do you want peace of mind, or the option of paying less? For me it was peace of mind so I fixed for 10 years. It was a good fix at the time 6.1% but then interest rates went down a year or so in. But I didn't regret it, I knew what I'd be paying until nearly the end of my mortgage. And I didn't lose out too much because I was mostly paying off capital.

Our 10 year fix is portable so it felt fairly risk-free.

You should see a mortgage broker but remember it’s in their interest to find you a new mortgage so consider very carefully any advice they give you about early redemption on your existing one! Like people say rates could go up and then come back down. You just don’t know.

@Ablababla Yes, I've always been a bit suspicious of the motives of mortgage brokers, who would probably love us all to be on 2 year fixes to earn them a nice chunk of commission each time.

Obviously they need to earn a living, but I'm wondering if it's a service that most people just don't need any more in the days of comparison sites and online applications unless their circumstances are non standard.

I severed my ties with mortgage brokers permanently about 15 years ago when I asked for a lifetime base rate tracker and they recommended a 2 year discount product instead and were quite rude when I explained why I wouldn't be taking it.

I got my lifetime tracker direct from the lender and still have it as up until a few months ago, we've been paying well below 1% pa interest so haven't rushed to pay it off.

You also need to factor in that it isn’t just the £4k you’d lose - you’ll also be paying more over the next 12 months than you would if you stay on your current fix.

It’s impossible to predict what the right thing to do is though.

If inflation predictions for next year are right, interest rates could go significantly higher.

Agh you’re right! I’ll see what they say.
I’m on the verge of flipping a coin although am veering towards the pay as much off as we can in the next year whilst still on the low rate approach. We’ve got 9 years left as it stands

Yes I think he’s factored that in-to be honest he’s gone over it so many times that if switched off a bit until we had a good look yesterday.

So if you’ve got 9 years left then by next Oct it’s 8 years? I’d stick at your current rate and see what’s what next year. If you’re sub ten years on the mortgage most of your payments must be capital and presumably not an enormous mortgage? Overpay what you can while your rate is low (or save up in an interest paying account to make a lump sum repayment next year). I wouldn’t lose £4K to fix at a higher rate in your situation unless you’re really worried about the possibility of higher payments - if you can overpay you’ll presumably be able to weather a storm.

Yes the boe do predict the rates will come down again after a year or two. But of course no one knows

If you’re happy sharing the information, what’s the current balance? Are we talking £50k of £500k? With only 9 years left, is the interest component still substantial?

You are the worried well of mortgage payments. I'd suggest you look at the Money Savings Expert website and ask there or use their guides and calculators.

We are in a similar situation in that our current deal - which was a two year fix - ends in October 2023.

I spoke to our broker as to whether we'd be better off paying the exit fees and remortgaging or hanging on to the end of the fix. His advice was that we shouldn't exit now, to enjoy the low rate while we could and to save any spare money (ha ha ha) to offset against the rise in rates by the time we remortgage.

You should definitely seek advice from your own broker though.

140 left.
I like the term ‘worried well’ 😂 I do appreciate we are in a fortunate position really.

I'm similar, with a small mortgage with not many years left and wondering whether to pay it off as interest rates keep leaping up or to keep it open as a ready source of borrowing in case needed in future, or reduce by a lump sum and if so, how much. Yes, fortunate.

I would look again at the £4k early repayment, as that seems high, given the balance (around 3%).

In my view and with my (uneducated) expectations for interest rates over the next few years, you may make some saving by switching now, but they will be marginal compared to your monthly payment, and you could also come out with a loss. What you would have though is certainty for the next 5 years, so it depends how much you value that. If it were me, I would stick and take a chance on rates in one and then three years.

But, you should probably speak to a professional.

One option would be to calculate your repayments at (say) 5% and to either overpay - if you can without penalty - or save the difference between your current and the possible new payment to create a buffer. No one knows what the economic situation will be in a years time, if the Ukraine war ends in the next few months then interest rates may start to drop soon after so refixing now, in a rising market, might not be a good strategy.

We're in a similar position - considering paying a fee to come out of our mortgage early and re-fix. Ours comes to an end March 2024, and taking into account the fee plus the increased payments, we'd be better off fixing now if the rates in March 2024 are over 4.5%. But if in March 2024 we could get a rate lower than 4.5%, we'll have lost out by switching now. Some of the predictions of inflation are so high I really worry about what the rates might end up at but I'm obviously not able to predict what they'll be and it's stressing me out. I worry I'll just watch the rates get higher and higher and end up thinking "you idiot, why didn't you fix it sooner!"

So the mortgage advisor said much the same really. He’s going to to look for the best rates he can but he can’t tell us what interest rates will/might do in the next couple of years.
He also questioned the redemption fee as it seemed high but I’ve been on the mortgage account page on my banking app, requested a settlement figure and it still comes up with a 4k redemption fee 🤷🏼‍♀️

I’m paying my early redemption fee, but something to consider, you can book a mortgage and not start it for 6 months. My free steps down on 1 Jan and so my new, more expensive monthly amount won’t kick in until then. It will cost but give certainty.

Coming back to this absolutely gutted!
the broker said he wouldn’t feel comfortable recommending us a new mortgage due to the high redemption charge.
we agreed and decided to stick with what we had.
Less than a month later it looks like we made the wrong choice :(
Plan now is to pay as much extra off as we can over the next year (can only overpay by 10%) and save save save for when the current mortgage runs out in the hope that we can get another chunk paid off then.

we are lucky in that it’s not an enormous mortgage relative to our salaries but we will definitely feel the pinch and it’s going to be a miserable few years.