It seems that your Top Up loan with the EBS might be at a higher rate than the normal home loan rate from the EBS? and that it is over a shorter term than your home loan? this is why your repayments are higher. By going with HBOS you are rolling your top up loan in to the new mortgage over a new 20 year period and will be paying the interest on the top up over the next 20 years.
I think it's BoSI not HBOS.
However rolling a
Home Improvement Loan into the main Mortgage can be justified.
It depends on what your view of the Interest Rate cycle is, but it looks as if we are at the beginning of the upward cycle, apparently.
Banks have factored this into the fixed rates they are offering now, so going fixed means you will be paying a premium for the secutity of knowing your repayments into the short-term future.
It also means that you will not be able to exit from the contract without paying for the privilege, and will not be able to vary/accelerate the repayments either by lump-sum or regular over-payments.
The BoSI option of taking a discounted tracker for a two-year period looks good to me, as it may allow you to ride out the worst effects of the rising rates, without the bad effects of short-term fixed rates.
Also, AFAIK, BoSI offer a pretty good switcher incentive, in that Legal Fees and Valuation are covered, according to [broken link removed].
Note that this is for mortgages of <=75% LTV.