To pay a £7K exit fee now

[millymog11]

For my fixed term mortgage on 1.9% expiring 3 March 2024 (i.e. 18 months to go) in order to get a 10 year fixed at 3.8% with a different mortgage provider which will basically pay off my entire mortgage and also consolidate my small home improvement loan?
£7K seems steep especially as I have 18 months left on my current fixed but my current fixed mortgage provider (Santander) has TOTALLY shut down its website page which, until 48 hours ago listed their other mortgage deals and I waited 55 mintues on their call helpline at about 5pm last night before giving up and putting the phone down.

(Single mum sole earner, two teenage kids live with and depend on my 100% of the time) , cannot afford to default on my mortgage, need certainty of mind, what would you do?)

Frankly I think you will struggle to get a deal to suit. Few lenders are going to find the current market stable enough to offer anything but a high rate deal to cover themselves 'just in case', so any unsigned deals will likely be pulled. As you're on a strikingly low mortgage rate for now, I would focus your efforts on reducing what you owe - pay off the home improvement loan - is that a fixed rate or variable? Particularly if variable then focus on clearing that ASAP, and building up some savings so either you can cushion a ride for a year on a variable before fixing once the rate improves, or you can pay a lump sum off the balance and reduce payments (and interest) that way.
Next year we may have extra high interest rates, however we have a general election in January 2025 - or possibly sooner, we don't know. It's quite likely we will get a complete change of government and thus the markets will change dramatically. If the £ rises vs the $ then imports become cheaper, inflation lower and we go back to more stability. I would suggest take a view of 'wait and see' as towards the end of 2023 I can only imagine the long term view will either be 'this policy is working' - we see investment in the UK as it's so cheap to buy from abroad, companies pay less corporation tax if based here etc (so the exchange rate, inflation, etc improves and inflation reduces) or 'we will get a change of government completely in Jan 2025' so either way the long term prognosis IMHO would be interest rates should begin to come back down during 2025, so a fixed term in late 2024 (if you can bear a short while on the variable) is likely to give you a far better price than today, or even March 2024.

I'm with @Singlebutmarried Stick with it

I survived the 16%+ or so interest rates of past years (there were no fixed rates then and many of my friends lost their houses) by taking on more jobs (cleaning pub loos before proper work was disgusting but it paid well) and by paying off capital to reduce interest with any lump sum I got (got a sales job and was paid commission).

I have 3 X btl mortgages that were tracking base rate 2 by + 1.25 and 1 by 1 percent. So currently on 2 X 3.75 and 1 by 3.25. They were lifetime trackers. I have applied for all 3 to go onto 5 year fixed rates at 4.03 percent. I have offer in writing and have 4 months to activate. So I am holding off 1 month on 2 and 2-3 months on other one. My broker told me once you have a formal offer made you have not got to activate it immediately. Each one is different but common to be given 4-6 months to activate. In your shoes I would make application for new mortgage, get formal offer, then sit tight whilst you see where rates are going. I am only activating when new mortgage works out cheaper than old one. I am lucky I have no early release penalties.

Also getting a formal offer in writing you can still not activate at all but gives you security blanket in case rates sky rocket. Which I think they will over next year. I also lived through paying 12.2 percent. In those days most mortgages were SVR. I noticed rates go up far faster than they go down.

If it it doesn't run out til March 24 personally I wouldn't do it. I would just try to overpay as much as possible now.

We’re in a similar position @millymog11 - fixed period ends Nov 23, £6.6k early redemption fee. I just spoke to my broker who pointed out that our redemption fee is staggered and so will go down considerably on December 1st. Mortgage offers are valid for 6 months and so we’re going to secure a new rate for 5 years asap and complete after Dec 1st.
Look closely at your deal and speak to a broker who’ll have access to better rates - things may be better than you think.

Obviously you need to do the maths but a cursory look at the figures you've given here makes me think that it wouldnt be worth it. 140k mortgage left over 10 years isn't alot even on a higher interest rate. 7k exit fees sounds exorbitant in comparison. I would stay put and put the 7k into overpayments.

Sounds like a rash decision. You do have time on your hands and you should hold your nerve for 15 months.

As pp state chuck any excess each month at the £10k loan as well as the £7k. The quicker you pay this off the better. Then divert the monthly payments for the loan plus the excess each month at the mortgage - this will reduce the amount owed so even if interest rates go up your payments should be affordable.

No one can tell you what the rate will be in 2024.

A very long time ago I maxed out my mortgage and I needed certainty regarding payments. I did a 5 year fixed rate of 7% which at the time was a good deal. Part way through the term, interest rates dropped to less than 3%. It was hard paying the higher rate but I accepted it as I had needed certainty when I took it out and had seen much higher interest rates.

After reading all these very sensible replies, I think I would:

• get the best AiP currently available, for as long as possible (ideally 6 months)
• use those 6 months to pay your minimum agreed amount off the mortgage and as much as you can off the higher interest loan
• reasses in 5 months (or a month before AiP expires.

At that point, calculate how much extra per month any new mortgage would cost you, and how much you'd have in savings if you put that away. How many months could you then use those savings to top up mortgage payments if the rate is higher?

I don't envy anyone going through this at the moment, but at least you have a little time.

I’m preparing to take the £5000 hit and add it to the mortgage so that it doesn’t actually really affect the cash in the bank so to speak. I am only gonna fix for another five years though because I anticipate the current landscape will look entirely different then.

You realise that the agreement in principle does not fix the bank into the right right ? Literally right up until the moment they press the button to transfer the cash my understanding is that they can change the rates in fact it actually said that on my mortgage offer.

Ariela · Today 09:55 thank you so much for your post and your excellent advice.
My home improvement loan is fixed rate interest over 6 years.

Hello,
We did exactly the same a few months ago - our fixed rate had 18 months left to run but we were able to lock in a new rate on a 10 year fix (at less than half the rates now on offer in the market). Whilst at the time it looked like a gamble and our mortgage broker thought we were unwise (your mortgage broker should be able to work out the maths for you) we worked out that if rates rose by more than 1.5% over 2 years we would break even considering the early redemption charge. Since then I have also realised

1. once you have the mortgage offer approved in principle, generally speaking you are given 6 months to complete. We were able to delay completion so that we had just 1 year less to run on the mortgage and our early redemption charged halved (which make the sums better we had originally anticipated) (you should check your early redemption charge and see if works the same way as you mind find it will be lower than you have been currently quoted)
2. if you wait 18 months to re-mortgage, if the value of your property falls (which is possible if current press reports are to be believed) you may find that you can't get the best rate as you have less equity in your property at that point (by re-mortgaging now you are not just locking in today's interest rates but also today's asset prices)
3. whilst it is expensive to roll the early redemption fee onto the mortgage, you could over pay in the future to reduce the costs of borrowing this
4. peace of mind in so far as your mortgage payment being fixed is invaluable

Best of luck.

@MountainSnow are you 100% certain that the rate they offer you in the mortgage in principle is the one that they are legally bound to because I am 100% certain that I read in my mortgage offer that until they hit the button and transfer the funds the rate can go up or down.

Have you considered asking your existing lender to increase the loan by 10K so you can pay back the expensive loan for your windows?
Your lender may charge you a higher rate than the rest of the loan, but it may well be considerably cheaper than your're paying now.
I think I'd be inclined to not pay the &k exit fee at the moment, and reassess the situation in the meantime. If interest rates are still high in a year/18 months time, I'd consider remortgaging over a longer period. You could always change the mortgage again if the outlook is better.
Ensure that you speak to an independent broker who has access to the whole market- it makes a world of difference!

@AuntSalli I am checking this! I did speak to my broker but will look at the mortgage offer (I think I would expect the offer to be conditional on certain
things - e.g. jobs still being in place and information provided being correct).

No way are you getting a 10 year fix at 3.8%. Have you been offered this, literally?

An AIP counts for nothing, that is a theoretical 'we can lend this amount'

To secure a rate you need a submitted application, and ideally a mortgage offer.

It’s not you that’s gonna change anything, it’s the lender honestly I am convinced I read it in the small print that nothing was guaranteed until literally the funds were sent because I remember thinking oh that works out well for them doesn’t it.

AIP will last a max of 3 months

You need an actual mortgage offer to secure the product.

And even the the lender can pull the offer even after exchange leaving you on the hook for at least the deposit.

Barclays have a similar offer

Well worth a view, if people are in the end of their fixed rate period.

I wonder if this leads to the banks thinking that rates will not go up as much as the media is reporting.

No way a bank the size of barclays would lock in 10 years at 3.8% if their analysts foress 5% BOE.

Or maybe the flat 5% erp will cover the potential loss?

@fromdownwest

I think partly this is why some have stopped offering because it’s so uncertain they can’t be sure what to do without potentially making a huge loss themselves. Crystal ball time!