Nationwide mortgage interest calculation

Radionotme

I consider myself pretty good at math, but this compound interest stuff gets pretty confusing!!
I've confirmed with Nationwide that interest is both calculated and compounded daily. As far as I can tell, that means that in order to calculate the daily interest rate from the annual one, the calculation is:
Annual rate ^ (1/365), rather than the more usually found
Annual rate / (1/365)
I've got two mortgages, the second of which was a topup one when we moved house a couple of years ago. Looking just at that one, I've got the following info over the last couple of days:
Date Mtg Value Total Interest Daily Interest Daily Rate Equiv Ann Interest
17/06/2010 £61209.23 £1719.72 £9.94 1.000162394 1.061060551
18/06/2010 £61219.16 £1729.65 £9.93 1.000162204 1.060987102
The daily rate is calculated by dividing the daily interest by the mortgage value.
The equivalent annual rate is taken by using the calculations above.
There are two inconsistencies here. First is that my actual annual rate is 5.98, so the figures above are 12bps higher than I'd expect.
The second is that although its by a very small amount, the amount of interest actually went down today compared to yesterday, which is the opposite of what I'd expect for a mortgage where interest is compounded on a daily basis.
So - I'm guessing that Nationwide aren't actually pulling a fast one, but rather I'm missing something. Anyone that knows more about mortgages care to guess what I've forgotten to include?

Thrugelmir

I've confirmed with Nationwide that interest is both calculated and compounded daily

Interest will be not be compounded daily.

More likely the interest will be calculated daily and charged monthly.

So the compounding will only start from the 1st day of the next month (or period).

Your calculation will need to take into account the number of days in each calendar month.

You will also need to include the amount repaid on the mortgage, as this reduces the balance owed at some point in every period.

Hope this helps.

getmore4less

There will be some daily rounding on the pence


I have an offset mortgage with Barclays and some months there is a 1p interest payment and other a 1p credit even when 100% offset.

Radionotme

Ah, OK - that makes a bit more sense then.

First off, the written reply that I've still got on my account, has to be categorically wrong.

Second, if I divide the rate by 12 months, and then apply the daily rate calculation to it, I get a value much closer to above. the reason its slightly more than I was expecting is explained by this being a shorter month than most.

Thank you!

JadeLD

I'm really confused, I also have a nationwide mortgage. For my tax return I need to calculate the interest on my account between two dates.

To make sure I'm doing it right I'm trying to recalculate the whole year but not getting the right answer.

I'm calculating the daily interest taking the previous days balance, I believe that interest is calculated daily at nationwide, is this correct:

=((5.88/100)/365)*PrevDayBalance

Currently I'm calculating the interest every day then adding it to previous days balance before calculating the interest for the next day.

I notice above mention of interest being compounded monthly - how would I include that?

tyllwyd

JadeLD wrote: »

I'm really confused, I also have a nationwide mortgage. For my tax return I need to calculate the interest on my account between two dates.

It might be a bit late to suggest this - but if it was me I'd simply send a secure message to customer services to ask what interest I'd paid on the mortgage between those two dates. I'd have thought there is a good chance they can just get the information off their system for you, rather than try to calculate it.

Topaz7

Just to let you know that I have 2 Nationwide mortgages - one interest only and one repayment

I log on to my online mortgage account far too often and have found that the following calculation matches the movements in daily interest that they charge to my account

(Previous days balance x Annual Interest Rate )/365.25

Radiantsoul

JadeLD wrote: »

I'm really confused, I also have a nationwide mortgage. For my tax return I need to calculate the interest on my account between two dates.

I believe you can ask for a certificate of interest paid.

KarenBB

If you call them they can send a interest statement to for the tax year, they can also give you the figure over the phone if you call. I've had to do this years ago after leaving it too late for one to be sent. The first person I spoke to wasn't sure how to get the figures but after speaking to a supervisor they know how to get the figure, they sent it out to me too and the figure given on the phone was correct.