If you’re reading in the media all the time about record low interest rates and how, despite the fact that everyone says they’ll rise again some time, they aren’t set to rise for some time yet – you may be understandably miffed if you’re paying a lot more for your own mortgage.
This is fact of life, unfortunately; you struck a deal at a point in time and the market moved against you so you lost out. It’s the same as any other market in this regard and it could, after all, have moved the other way and you’d be sitting pretty.
Nevertheless, the natural reaction of many people is to switch mortgages as soon as they’re able to re-mortgage – or possibly even during their current deal. But this is a little dangerous for a number of reasons; firstly, make sure you understand the punitive exit fees you may have to pay by leaving your current deal. These may be worth paying, on balance, or not; each deal is different on both sides of this equation and only you and/or your financial advisor can judge which is the best route to take. But do make sure you have all the information available and understand the pros and cons.
Remember, too, that the exit fees from your current mortgage lender aren’t all you’ll need to pay. The new mortgage deal will probably come loaded with charges including a valuation fee, a booking fee, legal fees, a completion fee and possible other charges. So it really is a case of reading the fine print before you jump.
Some lenders are well aware of this, though, and have taken steps to obviate the issue; HSBC introduces a new product this autumn, for example, where all such fees are waived. The bank made the move directly in response to the fact that existing homeowners want to take full advantage of the current low interest rates available but are understandably deterred due to the costs of re-mortgaging, and the hassle in dealing with the details and small print.
But even in this case, there may still be exit fees on your existing mortgage product – so make sure you understand what these are exactly. This should not be the case, however, if your mortgage agreed term is ending.
As for where interest rates will go from here – well the only way is up … eventually! Quite when this will happen is anyone’s guess, though, so get the longest-term deal you can at low rates, even if you’re paying a little more for the extra time. This will bring you longer-term peace of mind which is what effective financial planning should really be all about.
Alternatively, if you can afford to do so, then give consideration to paying your mortgage off in its entirety. Mortgage rates track interest rates, so if you’re cash-rich and you’re not investing the money shrewdly elsewhere – it’s generally a better idea to have no mortgage whatsoever – and that brings even greater peace of mind!
