Mortgage interest rates

auditman

Hi, I'm trying to find the best mortgage rate and I'm finding that when I look at websites and get quotes that I see the amount being shown as the monthly payment due on a mortgage of say £95,000 at a quoted rate of 3.19% the amount £473.74. But the figure being quoted isn't 3.19% but actually 6% by my calculation. This appears to be the case with all lenders in that the rate they quote is not reflected in the actual amount payable and the amount payable is a lot higher than the quoted interest rate. Can anyone explain a. why this is the case? and b. how is this allowed as it is totally misleading to those who are not numerate?

beecher

Maybe you're looking at the APR rather than the actual mortgage rate? Maybe if you link to an example it'd help?

jb131

OP I think that you're looking at repayment mortgages with a term of 25 years. As well as the interest the monthly payment includes some extra so that the capital is paid off.

auditman

The example I'm quoting is a £95,000 mortgage quoted at 3.19% on Halifax Purchase 2 year fixed as shown on Moneysupermarket.com with a monthly payment of £473.74. This is however not 3.19% but 6% by my calculations, unless I'm missing something. £95,000 x 3.19% = £3 ,030.50 per annum divided by 12 = £252.54 per month, not £473.74. £95,000 x 6% = £5,700 divided by 12 = £475, so 6%, not 3.19%. Does this make sense?

auditman

Yes it is repayment mortgages so presumably yes it is an extra amount that is being included to pay off the capital sum as well as the interest. It would be good however if this was clearly explained in quotes to those of us who are not so savvy about these things. Thanks for clarifying this, jb131

jb131

auditman, you are looking at repayment mortgages. The monthly payment of £473.74 includes £252.54 which is the interest on the£95,000 and £221.20 which goes towards paying off the capital so you don't owe anything after 25 years.

If you look at interest only mortgages which have an interest rate of 3.19% you will find that the monthly payments are £252.54 but at the end of 25 years you will still owe £95,000 because you haven't paid anything off the capital.

jb131

replied at the same time - glad I could help!

beecher

Aren't you forgetting about the capital repayment, as jb131 stated? If it was 6% the payments would be over £600