Confused about mortgage interest after rate change

Leaseholder49

I have a repayment mortgage with Nationwide on which the interest rate changed from 2.5% to 4% in November 2012.

At the time of the rate change there was £47,000 outstanding on the loan, with 13 years of the term left.

The minimum montly payment was £381 before the rate change, and went up to £393 (I have not been overpaying).

I have just received the statement of interest for the tax year just finished, and it is £1487 for 2012 - 13, with £1843 estimated for 2013 - 14.

For 2011 - 12 (the last full year at 2.5%) it was £1272.

I can't make sense of these figures. I've tried using Martin's mortgage calculator, and the new monthly payment seems right.

But I don't understand how a monthly payment increase of £12 (so £144 per year) will cover the increased interest of about £570.

Can anyone explain it to me?

Many thanks.

Thrugelmir

The interest you declare will be provided on the annual statement.

Leaseholder49

Thrugelmir wrote: »

The interest you declare will be provided on the annual statement.

I know, it's the figures on that which I don't understand. Was my original post unclear?

"I have just received the statement of interest for the tax year just finished, and it is £1487 for 2012 - 13, with £1843 estimated for 2013 - 14."

Thrugelmir

The old repayment of £381 appears high to have repaid the balance at a 2.5% interest rate.

GMS

What was the original loan amount?

Leaseholder49

Original loan amount was £75,000 with a 23 year term (taken out in May 2004), with a variable interest rate of no more than 2% above base rate (this was originally a residential mortgage with consent to let, hence the recent change in rate due to the 1.5% for letting).

The current repayment date is November 2025, as I made overpayments before the base rate went down to 0.5%. The £381 was not including overpayment though - at least, I requested to stop all overpayments from July 2010 and just make the minimum payment, perhaps this didn't quite go right. The letter I got just says "We have cancelled your arrangement to make additional payments. We will now collect £381".

Thanks for your help.

Thrugelmir

Leaseholder49 wrote: »

The current repayment date is November 2025, as I made overpayments before the base rate went down to 0.5%. The £381 was not including overpayment though - at least, I requested to stop all overpayments from July 2010 and just make the minimum payment, perhaps this didn't quite go right. The letter I got just says "We have cancelled your arrangement to make additional payments. We will now collect £381".

Thanks for your help.

This most likely explains the small increase. As the previous overpayments have accelerated repayment of your mortgage.

Leaseholder49

I have now got Martin's calculator to tally up with the Nationwide figures - I put in £73,000 @ 2.5% for 21 years and it gave me roughly the £381 repayment, and £47,000 @4% for 13 years and it gave me roughly the £393 repayment.

So that makes sense now - thanks for your help in prompting me to think about that.

I still don't quite get how my extra £144 per year is covering the extra £570 in interest, but I'm sure that all gets sorted out under the covers!