Understanding mortgage statement

Mrs_Optimist

I'm struggling to understand my annual mortgage statement from Barclays and wonder if someone more enlightened than myself can explain something.

We have a lifetime tracker, .95% above bbbr, interest currently 1.7% supposed to calculated daily, no restriction on overpayment's. Repayment with 13 years left to run.

Current balance £34,492.
Monthly payment due £366.34

We regularly make overpayment's and reduced our overall mortgage by £10,500 in last 12 months but our monthly payments are still £366? I have just called Barclays and they couldn't really explain it but said they would reduce our minimum payment to £230 ( we pay £600 every month and will continue to do this, plus lump sum overpayment's too).

However the monthly interest payments fluctuate wildly even on the months where the BofE haven't increased interest rates and I don't understand it.

An example, one month we overpaid our mortgage by approx £2,500 plus the £600 we usually pay, yet thel interest charged was £10 more than the previous month and didn't reduce the month after either . Normal monthly interest is £45-£50 per month.

Surely if the mortgage balance is reducing every month then the interest charged on the balance should be reducing too?

What am I missing ?

Tom99

[FONT=Verdana, sans-serif]The interest ought to roughly fluctuate based on the number of days in the month.[/FONT]
[FONT=Verdana, sans-serif]So roughly your current interest should be about:[/FONT]
[FONT=Verdana, sans-serif]£34,492 x 1.7% / 365 = £1.61 per day.[/FONT]
[FONT=Verdana, sans-serif]So about £45 for a 28 day month and £49.80 for a 31 day month.[/FONT]
[FONT=Verdana, sans-serif]You are overpaying at least £550 per month so the interest should be reducing each month by about 78p just because of last months overpayment.[/FONT]
[FONT=Verdana, sans-serif]These figures will be very slightly out because 1.7% accrued daily is a bit less that 1.7%/365 per day.[/FONT]

Thrugelmir

On a fixed rate interest product. Your repayments will be recalculated when the interest rate changes. Barclays will not adjust for ad-hoc overpayments .

Interest is calculated daily and charged monthly. With varying number of days in a month. Interest will likewise vary.

Mrs_Optimist

Thanks.

For clarity It isn't a fixed rate mortgage, it's a lifetime tracker. Sheer luck we ended on this as interest rates have been very kind to us.

What I dont understand is if our mortgage balance is £10,500k less than last year, why is the monthly payment the same. The term of the mortgage hadn't been reduced at all so we have been overpaying £120 a month as well as our usual over payments. I would have thought since the mortgage is considerably less than last year that the payments would have automatically reduced as the interest is calculated on a lower amount.

Barclays have readjusted our payment to £230 but I had to ring to ask them to do this rather than it being done automatically.

getmore4less

Barclays don't change your payment unless one of the triggers happen

The main trigger is rate change.

They also have an option to never drop the payment only change it if it needs to go up.

You can ask them at any time to recalculate using current balance and full term.

I think you can set annual statement as a review trigger.

getmore4less

As well as days per month there are the date the payment is made and the date the interest gets added which change for weekend and BH this can change the total days for a period.

Tom99

Mrs_Optimist wrote: »

What I dont understand is if our mortgage balance is £10,500k less than last year, why is the monthly payment the same. The term of the mortgage hadn't been reduced at all so we have been overpaying £120 a month as well as our usual over payments. I would have thought since the mortgage is considerably less than last year that the payments would have automatically reduced as the interest is calculated on a lower amount.

Barclays have readjusted our payment to £230 but I had to ring to ask them to do this rather than it being done automatically.

[FONT=Verdana, sans-serif]If you pay £600pm it will not make any difference to the actual date you will pay off the mortgage, nor the amount of actual interest you will pay, whether Barclays say it is a 13yr term, 10yr term or 8yr term.[/FONT]
[FONT=Verdana, sans-serif]Nor does it make any difference if they tell you your monthly payments are £366 or £230.[/FONT]
[FONT=Verdana, sans-serif]The only time it might matter is if you suddenly wanted to reduce your monthly payment to say £230.[/FONT]

Thrugelmir

Mrs_Optimist wrote: »

For clarity It isn't a fixed rate mortgage, it's a lifetime tracker. Sheer luck we ended on this as interest rates have been very kind to us.

Sorry my oversight. Same principle applies. Recalculations are performed at a change of rate. As at the outset they'll be calculated to repay the outstanding debt over the remaining term of the mortgage.