Articles > Getting Out Of Your Fixed Rate

Unprecedented falls in the Bank of England rate have led a number of people to wonder if it might actually be worth while breaking their existing Fixed Rate mortgages in order to take out cheaper Tracker or Fixed rate deals.

Fixed rates 2 to 3 years ago were about the 5% range, depending on the amount of deposit/equity. While historically, this is quite a respectable rate, it can seem a bit over the odds at the moment, particularly if you have a substantial amount of equity in your property.

When deciding whether to come off your contract, you will need to consider a few things.

How much longer are you tied in for? If it is only a few more months, then generally it is worth waiting, thereby avoiding large redemption penalties.

If, however, you have longer to go, you may want to look at the options. Firstly, you will need to see what new rate you can get. You will also need to take into account any fees associated with the new mortgage.

You will need to look around the various comparison sites etc. to get an idea. Be sure not to over inflate the value of the property, as this can lead to problems later.

Also, you need to work out how much the penalty is for redeeming your existing mortgage. Generally, this can be anywhere between 1% to 5% of the outstanding balance. You can obtain this figure by calling your existing lender, or by looking at the original mortgage offer, assuming you have filed it away in a safe place.

As for the calculation itself; if the monthly figure you will pay on the new mortgage is lower than what you are currently paying, while taking into all fees and penalties, then this may very well be a viable option for you.