Mortgage rate query

reck_uk

My mortgage rate is currently at 1.39% and has been set at that since the last BOE rate change quite a while ago.

Looking back at my statements for the last few months the amount of interest I pay seems to change every month, sometimes going up, then down and back up again. As the interest rate hasn't changed I don't understand why this is the case.

Surely the balance of my mortgage is going down slightly each month so shouldn't my interest rate go down slightly each month as well?

reck_uk

Also can someone explain to me how the interest is worked out?

These are the figures from last month.

Interest rate = 1.39%
Mortgage balance = £60,706.03
Interest paid = £71.67

How do they get to £71.67?

Going back to my query in the first post here's the interest amounts i've been paying for the last few months.

02/2010 = £71.67
01/2010 = £67.26
12/2009 = £74.45
11/2009 = £72.35
10/2009 = £65.56
09/2009 = £77.50

See how the amounts fluctuate up and down. With the interest rate not changing during that period shouldn't the interest i'm paying almost be the same each month?

_Andy_

Some months are shorter than others

reck_uk

Most of the time you’re only talking about 1 days difference though and look at the difference between January and February. 31 days for January at a cost of £67.26, then 28 days for February at a cost of £71.67.

Why would I get charged more for a shorter month?

Also Oct, Dec and Jan (all 31 day months) have costs of £65.56, £74.45 & £67.26 respectively, why the change in cost?

hillcats

Is there any offsetting going on here?
Current Account and / or Savings ?

See details about my mortgage below, my mortgage is a tracker and currently tracking at BofE +0.19% = 0.69% but my interest payments on the mortgage do move, but only slightly each month due to off-setting with current account and savings, but my variations are only around the £1-00 'ish mark.

reck_uk

Slight variations is what I would expect for mine as well hillcats. There is no offsetting involved with this mortgage. The interest rate is tied to the BoE rate + 1% (or around there can’t remember off hand).

I’ll give them a call tonight to see what’s going on, just wanted to check if this sort of variation was normal and what it was caused by before I call them and sound like a numpty.

reck_uk

Any idea how the interest amount is worked out?

I have the outstanding balance on my mortgage, the interest rate and my monthly payments so shouldn't I be able to work it out from these figures?

redpete

They might use accounting months which might not be the same as the length of the calendar month, and maybe variation also depends on when in the accounting month the monthly payment is credited.

January's payment is as near as makes no odds to 31 days, December's is very close to 29 days.

What's your monthly payment (which will allow you to work out the amount owing each month from how much you pay off the capital)?

redpete

reck_uk wrote: »

Any idea how the interest amount is worked out?

I have the outstanding balance on my mortgage, the interest rate and my monthly payments so shouldn't I be able to work it out from these figures?

If interest is charged on the daily balance then the interest per day is Balance*1.39%/365 with some minor adjustment for leap years.

reck_uk

redpete wrote: »

What's your monthly payment (which will allow you to work out the amount owing each month from how much you pay off the capital)?

My monthly payment is £264.34

redpete

In that case the numbers come out as 33, 28, 31, 32, 29 and 31 days in each of the months from Sept 09 - Feb 10 and your outstanding balance prior to Sept 09 was £61670.61.

The variation could be because your payment is made on the same date each month unless it falls on a weekend or bank holiday in which case it would be earlier or later.