Well, no replies yet. Although I ran a few tests and realised it's not only swype related. Other keyboard apps, even the default, in my case Samsung, behave the same way.
I have tried changing the input mode from automatic to gsm alphabet and kept getting the same error. I've been using Unicode as the input setting for a week now and I haven't had that problem anymore.
How to change your input settings? Goto your messaging app -> settings -> input mode