Mortgage interest - leap years

DT1_3

My mortgage company has charged an extra days interest for 2008 as it was a leap year. However, they have based the daily calculation on 1/365th of the annual interest rate, effectively charging 366/365ths for 2008. I believe this calculation is wrong as for the annual rate to remain the same in a leap year (which they have confirmed it does !) they must divide the annual rate by 366 for that year.

Does anyone know if this is standard practice in the industry ?

Also, as an interest only mortgage the capital increased by this amount (as no adustment was made to the direct debit) and so interest will be charged on it for future years.

I realise the additional day charged is small but it is the principle of whether borrowers are being overcharged. Also, multiply this small amount by the number of borrowers and it could add up to a decent profit for the lender.

Robert_Sterling_3

I wonder why they do not charge for 365.25 days every year.
I would also like to know how they deal with the leap seconds that we have on some new year's days.

Seriously though well spotted DT1.

Trying_to_be_good

I have a feeling this has come up before, and that the answer was it's the same for savers and borrowers, and the difference is too small to worry about (although it is irksome!).

With the world run by computers, they always seem to find a way to be in the banks' favour rather than the borrowers', though.

Do you have an option to overpay by the additional interest? Or be cheeky and ask the lender to credit it as a gesture of goodwill?