Shall I pay an Early Repayment Charge to remortgage now or wait and see what interest rates will be?

[Optimist2020]

My mortgage is due to renew next August 2023, the earliest I could secure a new mortgage offer is April 2023. I am currently on a 2 year fix at 2.64%, the early repayment fee is £1800. I have contacted my mortgage broker who advised that the cheapest current 5 year fix is 3.9% with my lender. The last time I remortgaged my broker advised that rates are likely to come down in 2023 and therefore fix for two years - I'm now kicking myself that I didn't fix for 5 years.

If I end my current deal, I could add the ERC to my current mortgage and my payments would be £60 extra each month, based on the current Bank of England base rate. Perhaps I watch too much news as it's all doom and gloom, but having visited the Bank of England website, they are set to meet on 4 more occasions (November, December , February and March) before I'm eligible to secure a new deal without paying the ERC.

I'm not sure whether it's best to wait and see what will happen next year to avoid paying the exit fee. My broker thinks rates will come down next year, if the government and banks are able to get inflation under control. However, I'm not sure whether inflation will get down to 2% by next April and if there are 4 successive interest rate increases, my mortgage payments will increase by much more than £60 a month.

AIBU - Wait until next August 2023

I would do it for piece of mind. But I guess it depends on your income/other expenses!

I would do it now.

I'd do it now as well so you know where you are with payments and can plan ahead. Who knows what will happen next year? No one.

If you can get that rate I would fix now but I am amazed you can still get 3.9% on a 5 year fix.

The rate is via my broker , I’m hoping my mortgage provider won’t withdraw this rate. I’m thinking if I fix now, if there is further financial turmoil between now and August, I will be ok.

in an ideal world, the Bank of England base rate will return to 0.5% but I’m not sure that will happen within the next year or so, not with inflation soaring. Yea

act now if you can.
things are going to get worse.
let's all try to be compassionate; there will be many who cannot cope.

No advice but i'm in a similar situation as you. We're fixed until Feb 2024 at 2.34% but the ERC is almost £3000.

Also wishing we'd fixed for longer. We did a four year fix thinking we might want to borrow more and do some more significant improvements. Not looking likely now!

@Optimist2020 Someone on here was saying they have locked in a 5yr rate to follow on after their two year fix ends, her dates were about the same as yours. It's worth asking.

i need sleep then coffee to answer you properly, but the way I looked at it was I could afford it at (say) 3.99% and knowing what it would be for 5 years, meant more to me than (the potential ) to save a little bit IF they dropped! If I knew whether I was staying in the U.K. or not (family issues) I'd have taken the 10 year fix (a few months ago it was 2.48 same as my 5yr.

it does screw with your head a bit though, paying to go on a higher rate than you're currently on!!!

but try what I said initially.

Good luck!

@alexdgr8 why are you telling people to be compassionate? Very odd

We paid 3k to fix in April. 10 year rate of 2.19. it's now 4.5% and the difference is £400 a MONTH. That's absolutely CRAZY.

So I think the resounding response is to pay the ERC for security in the next 5 years . TBH although I could afford an increase (as mortgage was stress test), I’m worried life will be grim if I remortgage next august and the base rate is 5%.

A family member had their house repossessed after the 2007 financial crisis so I’m always anxious around money.