working out interest rate with the monthly interest payment...

twista_2

Hi,

I going to be putting my savings into our offset mortgage now, and thought I'd just see what the interest rate was by taking the monthly interest that was paid in November 2008 and dividing it by the start balance of Nov 08.

interest paid in Nov: £3.66
(tax 73p)
Balance in Nov: £1,000.00

So that works out at 0.366% for November.

This is on a normal cahoot savings account, which states 3% AER.

Using 0.366% per month as compound interest, surely this works out to about 4.5% AER???

Where am I going wrong ?


cheers,
Phil.

Milarky

They probably cut the rate to '3%' at the end of the month in question. Interest rates would have been higher whilst you were earning that amount

twista_2

No, 3% AER is the quoted rate for the period until 7th Dec 2008. Then it drops to 2.15% or something like that.

Phil.

oldfella

£1000 at 3% for November assuming 30 days is £2.46

twista_2

Yes... so why have they given me £3.66 for Nov? (and other months)

Without phoning them up and asking why they are paying more, I'm finding it hard to understand what they are doing...