To ask what you’re doing about your mortgage?

[Franklyfranky]

my 2% fix expired last December, enter massive rate shock as my repayments went up by £550. Dh was insistent rates would come down so we went for a 2 yr. the 2 yr expires in October (funding tranches) and I wish we we for a 5 year.

i can’t really justify paying the erc on the deal to move to a 5 yr now which would be about £1500. I’m hoping things calm down But given where rates are heading… womp womp

those whose deal is ending this year, what are you planning to do? I’m debating a PT to a tracker

I really hope you're not overpaying a 0.99% mortgage

I know. DH really wanted to for mental peace of mind but I overruled him with interest rate maths. We are saving up in ISAs paying 4.9% +5.25% ready to repay as much as we possibly can when the fix rate expires.

That’s really helpful thank you!

and for the record I’m not complaining merely mooting should I pay my 1% erc (not .5 I just checked) and move to a 5 yr or hang fire. Rock and a hard place

So true! I can’t believe anyone would overpay in those circumstances instead of putting it in a high interest savings account or premium bonds or whatever. Basic maths!!!

Too few people think about affordability when deciding on a mortgage. The rule is, the less flexibility you have in your budget, the more certainty you need.

If mortgage rates going up 0.50-1.00% would cripple you, then you should take a 5 year fix.

If you have more flexibility in your budget, then think about (I) how likely are you to want to move house in the next 5 years and (II) how likely are you to want to overpay by more than the fee-free allowance (usually 10% per annum).

If either of those is a reasonable possibility, you should take a shorter fix or go with a floater. If both of those are unlikely and you don’t have a view on 2 v 5 year interest rates, take the 5 year fix as at least you’ll usually pay a lower arrangement fee (since it’s split over 5 years rather than having to pay a new fee every 2 years).

Yeah both work for us thankfully but obviously who’d pay more when you don’t have to, and trying to predict the swaps (and rates) is a fools game.

thats at product expiry though, but now the question is to pay the erc or not? Inflation result is due tomorrow i think, just looked

I locked into a 5 year fix at 4.04 in September, no product fees.

I expected to switch it at least once to a cheaper rate before it completed at the end of next month.

They went up instead so I'm glad I went for it so early.

Except we are higher rate tax payers and would have to pay tax on the interest earned, which is extra admin that I don’t want to be bothered with.

Also, and I know it’s illogical but we want the certainty of the mortgage being gone.

Got exactly the same rate as you 4.04% but previously was 1.93% - costing an extra £70 per month (5 yr fixed) which is nothing compared to some people but l can't wait to get rid of the damn thing!

My 5 year fix ends in 2026
I'm with an adverse lender so my rate at the time was awful (4.78%)
Hopefully I've managed to get far enough into sorting my credit out that I can now go with a standard lender and get a similar ish rate

I'm doing this too.

I think you would be mad to pay 1.00% ERC now when your current fix ends in October. You can get a new 5 year fix rate locked-in in April / May for the end of your current term.

Unless you have a very strong view that rates will go up in the next 9 months. Given your comment on predicting rates, that doesn’t seem to be the case.

But babe, that was then, this is now… right now things look ropey…

Locked in at 1.35% until March 2026. Haven't overpaid yet, but chunk of savings at 4.5%ish, so will overpay at the end to hopefully reduce the term from 10 to 7.5 years, with payments remaining roughly the same if the rate increases to 4.35%ish. If I've calculated correctly, it would only go up by £40 or so a month.

Thanks for prompting me to do some calculations. I've been dreading and fearing thinking about this quite a bit, we were first time buyers so it will be the first time we remortgage. My work situation is precarious so I need to sort that asap, worried it won't be approved otherwise.

Tracker with no ERC and started moving money out of savings as the mortgage rate was so much higher than I was getting on the savings after tax.

If you take a product with your existing lender (provided no changes) they won’t do affordability again

The information you’re worried about is the same information the market is using to set the current 5 year mortgage rates, so it’s already largely priced in.

The 1.00% ERC is a deadweight loss, so for that to be the right decision you need to beat market expectations by 0.20% per annum (+/- whatever the difference in cost between your current mortgage and the new 5 year fix would be over the end of your current term + the additional unamortised arrangement fee).

If you have sufficient conviction in that position, then by all means take it, but query why you would be confident in that forecast (unless you plan on running a macro hedge fund).

i dont think residential lenders have responded en masse to the 5 yr swap hike yet, key word yet.

i guess my concern is the cut in Feb or predicted cut that the market has priced in. If inflation is high and things in the states are high it will make it hard to justify a base rate cut, and if the bank don’t cut the base rate swaps will go mad

in the money we’d save as our monthly payment would go down by£120, it would be about 20 months before we break even from that erc charge.

im going to call my lender and see how long an offer is good for in this instance (normally it’s like 2/3 weeks)

With labour and rachel thrives in control,% rates will go one way...⬆️

Wouldn't it be better if everyone paid, say 3 percent for the lifetime of their mortgage instead of this "rate tarting"?

Same for us. We fixed for 5 years in 2022 at 1.99%. We have overpaid the maximum every year since and are aiming to pay the balance when this fix comes to an end 🤞

I am fully aware that I don't understand how / why / when mortgage rates go up and down, and have little chance of predicting them. I would also usually rather prefer to go for (say) a 5 year deal that is a definite sum over a 2 year deal and then unknown, because the maximum we're going to pay is known. Even if it works out quite a bit more expensive, because rates drop, at least it's not going to be an unknown and scary leap after 2 years. But I'm fairly risk adverse, so that might not work for some people but just annoy them.

For one period of our mortgage it definitely cost us more when we fixed for 5 years, a 2 year deal at that time was a fair bit lower in interest terms, and it was still lower when the 2 year deal would have ended. Our current 5 year fix started in April 2022 and is 1.75%, and the 2 year deal would have been 1.5% but (as it turned out) would have cost us a lot more when the 2 year expired. That was just luck, though, we didn't predict that the rates would have gone up, we just played safe.

I paid a lump sum off mine last December and with my new deal despite it being a higher rate meant by payments were less. I have been saving so I know that come the end of this year when I have to change again I can do the same again and take a lump sum off and then hopefully it will reduce my payments once again. I know not everyone is lucky to be able to do that but for me it works that way and I can overpay as I do not get charged that way either.

Because no one knew the government would crash the economy in six months.

I was on a 1.4 which shot up to a 5.6 last time. That was a shocker. Really wished we'd fixed for the 5 year at that point. Hopefully will be less next time.