Am I locked into my five year fixed rate mortgage, two years in?

Bram Vis answers your mortgage questions

I signed up to a five year fixed rate term two years ago. I have had a perfect payment record - but there are some better rates out there now – am I locked into this?

Yes – basically. Are you locked into this mortgage so you cannot change? – no.
Are you locked into this mortgage because to get out of it you will be charged Early Redemption Penalties (ERPs)? Potentially. Getting a Fixed rate mortgage is great – because the rate tends to be low and is ‘fixed’ but it can be very expensive to get out of. Early Redemption periods can last 1-5 years, depending on the lender. Some High Street lenders currently charge as much as 5% of the mortgage sum if you want to change within five years. Brilliant rates on day 1 – but if you were thinking about moving house in 3 years – you need to be VERY careful. Please don’t underestimate this.

Example

A fixed rate mortgage is achieved for £450,000 at 1.9% fixed for five years. That sounds pretty good. Then the client wants to move to a new house after three years. The ERPs are only 3% - pretty standard. So – there will be an additional fee of £13,500 to pay to move. This is when it pays to have expert advice.

Please don't hesitate to call me directly on 020 7504 1090 or 01983 642 643 if you would like to talk, this or a similar scenario, through with me.

The information contained in this answer is for illustration purposes only and does not contain all the details required and should not be used as a personal recommendation without them. Do contact Bram if you would like an entirely free consultation to talk through your requirements, exact circumstances and best mortgage options.

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Type of Mortgage (tags): 
Fixed Rate Mortgages

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