Should I Remortgage if I have Early Repayment Charges on my Mortgage?

With the Bank of England base rate having risen to 0.25%, and speculation that we may see interest rates rise further next year to control inflation. Should mortgagees who have an existing fixed rate be looking to review their mortgage and potentially looking to perhaps secure a longer-term fixed rate? This may be a question that many households will ask over the coming months.

Here is a scenario from an existing client who has over two years remaining on an existing 5-year fixed rate mortgage. However, in this situation the clients want to review their options with regards to securing a potentially longer-term fixed rate, whilst rates are still comparatively low.

Initially, our response to the client on initial investigation, was that they had early repayment charges of approximately £1400 and therefore they should consider this penalty. If the clients were wanting to save this amount over the remaining 2-year fixed rate period, then they would need to see a reduction in their monthly mortgage payment of approximately £58 per month, this would then make paying the early repayment charge worthwhile.

However, if rates do continue to rise, is there some sense in securing a lower rate that is still available and securing a longer fixed rate? Certainly, for mortgagees that are not looking to move and do not need further additional borrowing, then this could be very worthwhile investigating especially where the early repayment charge is not too costly.

The figures

Property valuation: £285,000

Existing mortgage: £74,000

Early repayment charges: £1400

Total remortgage required: £75,400

Mortgage term required: 25 years

Existing mortgage payment: £310 per month

Brief Summary of Potential Schemes available

• Scheme
• Rates from
• Monthly Mortgage Repayment from
• 5-year fixed Rate
• 1.49%
• £301-£320
• 10-year fixed Rate
• 2.09%
• £323-£330

Please note these figures are correct as at 21/12/2021. Rates are subject to change by lenders without notice

As can be seen from the figures above which include adding the early repayment charge to the loan, potentially the client could save up to £9 per month and further extend their fixed rate by 3 years. Or with the 10-year fixed rate pay an additional £13-20 per month and secure their fixed rate for a further 8 years. In this case as the client primary focus was to secure a fixed rate for a longer term. So, the clients are choosing to pay off the existing lenders early repayment charges and secure a longer-term fixed rate for their own peace of mind.

Every client situation and circumstance are different and therefore reviewing and getting professional advice is we believe extremely important. If you would like to review your options, then contact us using the Contact Us button below, please note we do not charge for initial consultations or providing research you can therefore research your options totally cost free.

If you decide to leave the remortgage until closer to your early repayment charge ending MMPE can set a review to assist at the appropriate time.