Hi
I have a mortgage and a deal period is ending soon so my lower rate is scheduled to jump from 1.49% to a standard rate of 3.74% for the remainder of the term (26 years).
I currently have approximately £52k outstanding on this mortgage. All the options below allow for overpayments, but the fixed ones only allow for "Early Repayment Charge applies for overpayments over 10% of initial balance or if you exit your deal early". This means I am allowed to make overpayments of up to 10% per year of the original mortgage loan amount (10% * £52k = £5,200). Any overpayments over the 10% allowance will be charged an ERC (2% in yr 1, 1% in yr 2) on the amount above the allowance, not the total overpayment. The year begins on the anniversary your mortgage started. (this is around £430/month, i currently overpay around £40/month)
There are a few options:
2 yr Fixed @ 1.24% : arrangement fee £999
2 yr Fixed @ 1.64% : arrangement fee None
3 yr Fixed @ 1.54% : arrangement fee £999
3 yr Fixed @ 1.84% : arrangement fee None
2 yr Tracker @ 1.14% (currently) : arrangement fee £999
Bank of England Base rate +0.89%
2 yr Tracker @ 1.54% : arrangement fee None
Bank of England Base rate +1.29%
I can have the arrangement fee added to the mortgage to pay down over time, but this doesn't feel..... right.
My initial reaction is to go with either the 2 yr fixed @ 1.64% (with ERC) or the 2yr tracker @1.54% (no ERC) ; and hope the Bank of England base rate doesn't rise. I'm leaning more towards the 2 yr fixed @ 1.64% as this would be a "happy" medium between the 1.54% and a potential 0.25% BoE interest rate rise.
I do not expect to make overpayments over the approximate £430/month as i am currently investing that in some diversified trackers (i figure i can "get this money back" in an emergency however if it is in the mortgage it is "gone").
My head is burst.... any advice or thoughts would be welcome on my logic.