Bank Has Advised I Am Due A Refund On Redeemed Mortgage

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(with permission)
OP sent me some numbers so I have had a go at working out what difference it made not lowering the payment as the rates dropped.

Starting debt :£88k
rate : base + 1.29%
payment : £528.40
start payments date : 22/12/08
last payment date : 20/07/16
end balance : £46,813.10
Compensation : £5100.

based on the amount owing, the payment, and base rates around Dec 2006 of 5% I make the full term 33 years or very close so have used that to work out the payment due based on dropping rates.

We know the exact dates of rate changes by mortgage providers are not the same as when the base rate changes but for this calc the same month will do.

Running the numbers with the fixed payment and a payment based on the rate dropping in line with the base rate changes.
(with some rounding to £100s)

£47,500 £69,300 : end balance (not far off what the op got above)
£61,300 £40,900 : total paid ( £20,400 difference)
£40,500 £18,700 : Debt reduction ( £21,800 lower)
£20,800 £22,200 : interest paid. ( £1,400 saved)

From 12/2006 to 09/2008 the payments would have been close anyway.
between 09/2008 and 03/2009 the base rate dropped to 0.5% and the new payments should have been around £300.
7.5 years @ £220pm is £19,800 which accounts for most of the difference in actual payments.


No idea how they calculate compensation at £5100 when there is no loss, the OP has saved around £1,400 in interest, just the opportunity costs.

flat 8% on the difference in payments is only £1,600

putting the differences into a 8% compounded over the period, less the interest saved on the mortgage gets into the ballpark(very rough calc could add it to the spreadsheet to see how close it gets).

edit: I did the compound less the interest saved and got £6.2k.

Be interested if there is any more info on how they calculated the compensation.