The fixed rate mortgage dilemma – should you stick or twist?

At Nous we live and breathe solving problems - and making things easier for people, particularly when it comes to managing their household finances.  So we were interested to discover recently that an increasing number of people with fixed-rate mortgage deals are struggling to decide whether to break their fix, pay an early repayment charge, and remortgage to another fixed rate now – or wait until their fixed rate deal expires and remortgage at a later date – because they are worried that interest rates are going to continue to rise in the future.

We looked around, and couldn’t find anything that was useful on the internet. People we spoke to who were experiencing this issue reinforced this. And what’s more, they weren’t able to get any good professional financial advice either, let alone someone or something to help with the calculations. So we got to work - and quickly built this calculator.

It’s not financial advice, and we do encourage people to discuss it with a broker or other qualified financial advisor, but it provides some illustrations of the potential costs involved.

It’s a really difficult problem for many people - firstly, the maths of mortgages is quite hard. Trust me, I know, because I built the first version of the calculator in Excel, and it really tested my abilities - it has been a long time since I was an analyst!

Secondly, mortgage brokers seem to find it difficult to give advice on this topic - because it’s a certain cost (the repayment charge and increased monthly payments) and an uncertain benefit (potentially avoiding much higher interest payments at some point in the future). And, because the last time interest rates were rising anywhere close to how they are at the moment, the internet basically didn’t exist, there’s not really much useful help or advice out there, and no calculation tool like our one.

Greg wrote a great piece about it here in the Evening Standard.  It’s been picked up in lots of places, including by the FT, and this thread on reddit too. 

I’m pleased to say that we’ve had amazing feedback about the calculator, and it seems to have already been genuinely useful to many people. It’s hugely rewarding to be able to use our expertise to help.

The sad fact at the moment is that people need a lot of help. We can already see that many people are struggling - energy debt is rising, short-term borrowing is going up, and the impact of inflation is hurting with the gap between inflation and wage growth the largest in a generation.

Our research still says that the vast majority of households are underestimating the impact that rising prices and interest rates will have on their households. Our advice remains the same - for people to get educated about what inflation means for them, to budget, and to make a plan to save money - ‘saving is the new spending’, I think might be the phrase…

We’re very pleased to be able to help people in these challenging economic times.