There may well be a penalty if you have recently enjoyed a discounted rate Discuss your plans with your lender. Find out, too, whether your repayment will have an immediate effect on the interest you are charged, or whether you would be better off making the payment nearer the lender’s financial year-end. You’ll also have to make clear whether you want to shorten the term of your loan, or keep the same term and benefit immediately by having a lower monthly payment. Don’t pay off your mortgage if you are likely to want to borrow at a more expensive rate (for example, to buy a car) in the foreseeable future.I have two fixed-rate mortgages, one on my main residence for pounds 32,000 and one on my holiday home for pounds 33,000. Crunch time comes at the end of February when both loans revert to the standard variable rates. For a period of three years I will have to put up with these rates or pay a six-month interest penalty if I switch to a different lender.

Is there anything I can do?CM, West YorkshireYou have a legally enforceable agreement which obliges you to pay a six-month interest charge if you pay off your mortgage in the next three years There is no way round this. You need to find out whether another lender can offer you a lower rate which, over time, will more than make up for the cost of switching lenders.There are usually costs for anyone switching lenders – arrangement fees, valuation fees, legal fees and so on (although some lenders agree to pay some of these). If you have an interest penalty to pay, this is simply an extra switching cost. You’ll also need to take account of the cost of any compulsory insurances you have with your current lender. In truth, the costs of switching lenders are often high enough to make switching uneconomic.Take a current two-year fixed rate of 4.99 per cent from the Woolwich.

Compared with a typical variable rate of 8.7 per cent, that’s a potential saving of 3.71 per cent a year (3.34 per cent on the first pounds 30,000 of a loan including Miras tax relief). Over two years you could have a saving of pounds 2,002 on a pounds 30,000 loan, or pounds 4,230 on a pounds 60,000 loan The saving would rise if variable rates rose further. But, equally, it would fall if variable rates were to fall.Against this potential saving you would need to deduct the Woolwich’s fee of pounds 295 and the possible extra cost of Woolwich’s buildings and contents insurance, compulsory in the first year. You would then need to deduct the legal costs, valuation costs and any other unavoidable costs. Deduct, too, your interest rate penalty – pounds 1,175 on a pounds 30,000 loan and pounds 2,480 on a pounds 60,000 loan.

Another possible hidden cost is that your current lenders are both mutuals. They could convert to banks and produce windfall shares for borrowers. The Woolwich has already converted and so will not be giving away any more windfalls.All in all, switching may not be a worthwhile option. Your best hope may lie in the expected, possibly dramatic, fall in mortgage rates. Short- term interest rates have been rising but medium-term rates have been falling. We could be in for an era of low mortgage rates, but rates may not begin to fall until 1999.My 59-year-old husband had to give up work two years ago because of ill health.

He receives pounds 1,000 a month from a permanent health insurance (PHI) policy until his 60th birthday He also has four different pension plans. Will he be allowed to withdraw tax-free lump sums from these plans while putting off buying an annuity?CK, West SussexNew rules have been in place since 6 April, 1995. They allow you, within limits, to draw an income from a pension fund while postponing buying a pension annuity. You can delay the pension annuity until the age of 75 at the latest. At this age you will obliged to buy an annuity in the normal way.Roughly speaking, you can take a quarter of your fund as a tax-free lump sum. The proportion will be less than this if you intend to provide a dependent’s pension.