Should I ditch my fixed rate mortgage?

[Nickynibbles]

Back in April I did the sensbile thing (at the time anyway!) when renewing my mortgage deal by taking a 3yr fixed rate deal at a good 5.29%. Given the current economic climate we're in im now considering ditching this deal in favour of a tracker deal I can get at 1.49% over base rate, ie 3.49% currently. The only sticking point is the £2,900 penalty i'll have to pay to get out of my current deal & the £700 fee to set the new which would bring the capital debt to £100k. Current repayment is £662/mth which i just round up to £700, under the new mortgage the payments would be £602 which i'd plan on upping to £700 still. By doing some maths i've forecasted that come April 2011 when my fixed deal would end as long as i keep up the overpayments i'll be more or less owing the same capital amount, but i'd be better off if the rates dropped any further. Other advantages are no penalties or tie ins & its an offset mortgage so current account balance would reduce interest costs a little. Plus there's the flexibility that should I need a little extra cash one month I can always back off the payment to the minumum.

So what would you do? Would you stay as you are to avoid the additional capital debt, plus if something goes wrong & rates shoot up you'd be safer? Or would you try & benefit from the still declining economy & probability of futher rate cuts & hope rates dont go back in a couple of years time making this a pointless move!?

Just to add im thinking of doing this because im struggling in the current climate, I have a good stable (i think!) job with negligable other debt bar the mortgage so can happily afford the current payments, I just loath paying the robbing b'stad banks too much interest!!!

 

[Sohrob]

Because your borrowing is quite low and your fixed rate is quite competitive there wont be a lot in it, the easiest way to compare it is look at what you pay now vs the new lower interest rate plus redemtion and setup costs added to the loan amount over a 12 month period.

Remember that although unlikely rates could go back up, also speak to a broker as they will give you a proper cost comparison but personally your not going to see a huge saving but will increase your risk.

 

[Nilz]

I myself have wondered the same thing too, but i think the early repayment charge and the exit fee, along with the setup fees would work out quite high, so im thinking to just stick with what i got and see it through!!!

You win some you lose some i guess.

 

[Essflee]

I'd stay as you are too.....A lot of people are in the same situation at the moment, thought getting a fixed rate was the way to go when no one could of predicted that interest rates were going to be cut so much, it's just one of them things. As long as your comfortable then i'd try to put it out of mind. There's some people unfortunately in a much worse situation, i know one bloke who bought a place earlier in the year and is fixed at over 7%.....ouch !!! Interest rates aren't going to go back up i think for a while as yet....some experts predict the bank of England could even drop the base rate down as low as 0%......
Predictions were also that the base rate could be 2% by next summer...and look whats just happened this month.
No one knows really....

 

[VRStu]

Very similar to me, I've decided to stick with it for now at least I know where I am with it.

Your exit fees and new setup fee will take quite a chunk out of any saving.

 

[Lee_R]

I'm fixed at 5.7% for 5 years (3 left now) and also thought of doing this, When i looked into it they wanted 5k for me to get out of the deal so I crossed that off!

 

[motorbikez]

I'd stay where you are,just because libor rates are falling doesn't mean the banks will pass on rate cuts in full or at all.Their balance sheets are dire and will do all they can to preserve cash and rebuild their balance sheets despite pressure from the government.
Indeed if you have a credit card and don't pay it off in full you will have noticed most banks have increased their rates over the last 3 months.

 

[unkle]

Havent seen any mortgages being offered at the new interest rate yet.

I'd leave it until after Christmas.

 

[gareth_oau]

currently a fixed rate in Oz (for 5 yrs) is around 7% - sounds like you guys are getting a bargain (or at least it helps to offset the high price of houses!!)

 

[fran-s3]

Im in the lucky situation of re-mortgaging in Jan... Still considering whether to have a tracker or fix it a low rate...

 

[NHN]

www.imm.uk.net is a client of mine who are good brokers, email them or ring, no promises they can do any better but they are very good at what they do so no harm asking as is free advice anyway.

 

[Nickynibbles]

Pretty much set on staying where I am for the time being, things are too topsy turvey out there to be taking a risk financially that may not pay off!

 

[TDI-line]

I'll stick.