Wrong calculation of interset?

derrick

Last year I transferred £150,000 from a maturing fixed rate bond with the Derbyshire building society into a new fixed rate bond with the Derbyshire @ 7.01% gross interest.

Start date 31st July 2008. (they said 1st August, but it is a "12 month fixed rate bond"!).
Maturity date 31st July 2009
Therefore gross interest should be £10515.

However they are telling me that the gross is £10502.95.

Now their reason for this is because 2008 was a leap year the interest is calculated as a 366 day year!

They say that the interest is calculated daily and the days from 1st August to 31st December 2008 are calculated on a 366 day year, then from 31st December 2008 to 31st July 2009 are on a 365 day year!

It is a 12 MONTH FIXED RATE BOND! I cannot see it makes any difference as to what type of year it was and I say I have been short changed by £12.05 gross, £9.64, net

Am I right?
They will not budge and I have told them I will take it to the Ombudsman, I know it is less than £10. but why should they have it?

Lokolo

I don't think they have done anything wrong here. 2008 was a leap year so daily interest is over 366. 2009 is over 365.

derrick

Lokolo wrote: »

I don't think they have done anything wrong here. 2008 was a leap year so daily interest is over 366. 2009 is over 365.

My bond started 1st August, the extra day was in February, therefore my 12 months was 365 days! If we use 366 days, that means they had my money for an extra day and gave me no interest for that day, they can't have it both ways!

As I have said it was a fixed rate bond for 12 months, therefore the days should not matter, and if they did then I should have an extra days interest, £28.80 gross per day over 365 days, £28.73 over 366 days!

Lokolo

derrick wrote: »

My bond started 1st August, the extra day was in February, therefore my 12 months was 365 days! If we use 366 days, that means they had my money for an extra day and gave me no interest for that day, they can't have it both ways!

As I have said it was a fixed rate bond for 12 months, therefore the days should not matter, and if they did then I should have an extra days interest, £28.80 gross per day over 365 days, £28.73 over 366 days!

Interest is calculated on a daily basis. The year 2008 has 366 days in it, therefore, on the daily basis, in the year 2008, interest is calculated 366 days. Who cares if the extra day is in February, the extra day is still in the year 2008.

Bit in bold - and you got 365 days worth, just that 153 days of that were in a year where there were 366 days so you recieved less interest on those days.

derrick

Lokolo wrote: »

Interest is calculated on a daily basis. The year 2008 has 366 days in it, therefore, on the daily basis, in the year 2008, interest is calculated 366 days. Who cares if the extra day is in February, the extra day is still in the year 2008.

Bit in bold - and you got 365 days worth, just that 153 days of that were in a year where there were 366 days so you recieved less interest on those days.

But there was more days! should it not equal itself out ?

!st August 2008 to 31st December = 153 days
1st January 2009 to 31st July = 212 days
Total = 365 days.

However it is worked out a 12 month fixed term bond should pay the total interest; -

£1500,000 x 7.01% = £10515 gross interest, NOT £10502.95 what they paid!

One reason for taking out fixed rates is so that you know where you stand as regard the end total, not so they can go messing about with a leap year!

If I started the bond 1st February 2008 until 31st January 2009, I would still have expected to receive £10515 gross, or should I have expected more as they had my money for an extra day?

Lokolo

derrick wrote: »

But there was more days! should it not equal itself out ?

!st August 2008 to 31st December = 153 days
1st January 2009 to 31st July = 212 days
Total = 365 days.

However it is worked out a 12 month fixed term bond should pay the total interest; -

£1500,000 x 7.01% = £10515 gross interest, NOT £10502.95 what they paid!

One reason for taking out fixed rates is so that you know where you stand as regard the end total, not so they can go messing about with a leap year!

If I started the bond 1st February 2008 until 31st January 2009, I would still have expected to receive £10515 gross, or should I have expected more as they had my money for an extra day?

You should expect more because the last month is based over 365, which is more/day. And the total number of days is 366. Try it out in the next leap year

Its because of the lame term "daily interest accured" that this occurs. You win some you lose some. Try it out on the next leap year and see what happens.

derrick

Lokolo wrote: »

You should expect more because the last month is based over 365, which is more/day. And the total number of days is 366. Try it out in the next leap year

Its because of the lame term "daily interest accured" that this occurs. You win some you lose some. Try it out on the next leap year and see what happens.

Bottom line in a nutshell, they had my money for 365 days,a normal,(not leap), year, the rate was 7.01% fixed, they paid £12.05 gross less than the calculation for 12 months, and you think that's right?!

Lokolo

derrick wrote: »

Bottom line in a nutshell, they had my money for 365 days,a normal,(not leap), year, the rate was 7.01% fixed, they paid £12.05 gross less than the calculation for 12 months, and you think that's right?!

No, some months were in a leap year, some months weren't.

IF interest was accured yearly, you'd have a case because it would be based on the final amount in the year it was maturing.

derrick

Lokolo wrote: »

No, some months were in a leap year, some months weren't.

IF interest was accured yearly, you'd have a case because it would be based on the final amount in the year it was maturing.

Sorry, got to disagree, it was a fixed rate product for 12 months,(365 days), they had it for that length of time, I am entitled to the interest at the rate stated.

This is going to the Ombudsman as I do feel that I have been duped, if I am wrong then so be it, it will only cost me a couple of stamps, but will cost the Derbyshire considerably more.

I am not after some sort of compensation, just what I feel I am owed.

I had problems with the Derbyshire last year on maturity with transfer of interest to external source, (maybe I should have learned then, certainly have now).

Ingsy

I see what you're saying regarding the interest, but you're clearly not skint if you can afford to put £150,000 away for an entire year without needing to touch it - do you really need to stress so much about less than a tenner?

derrick

Ingsy wrote: »

I see what you're saying regarding the interest, but you're clearly not skint if you can afford to put £150,000 away for an entire year without needing to touch it - do you really need to stress so much about less than a tenner?

I am not stressing , but this is a money saving site, not a money give away site, if it is mine, I want it, and if that means involving the Ombudsman, then so be it.

The guy I spoke to at the Derbyshire could see my point, but his line manager said, " computer says no". It will cost them a lot more than £10 to answer the Ombudsman, I just can't see their logic, I am not asking for more than I am entitled to.