Strange Barclays recalculation

User6565

Has anyone had their monthly payments recalculated at the end of a mortgage year somewhat randomly. My monthly payments will change to be £1 less. The call handler said it was nothing to do with my overpayments but as a result of a system recalculation at the end of the year. My payments have never changed before so I’m really curious as to why they might be reduced by £1 a month. The figures don’t correspond with any overpayments I’ve made so am inclined to believe the call handler that it is something different. Apparently they do this automatically for all customers (never happened to me before though). Any ideas?

I know the figure isn’t significant but they couldn’t say on what basis it had changed which bothered me a bit in case it randomly changes by more next year.

Lotak

The calculation that gives you your mortgage amount is based on monthly repayments over a constant period of 365/12 days. There is no such thing as 365/12 days.
In reality, you make payments every 30 days, 31 days or 28 days (or 29 in leap year). This has a small impact on the actual capital balance of the mortgage, compared with the theoretical balance that would be if you paid every 365/12 days.

Barclays's system recalculates your monthly repayment to reflect this, so that your last payment is exactly the amount you are due to pay, and not that you owe or are owed a small amount at the end.

Lotak

As an example, if you had a 15 year loan at 2% for £500k, starting on the 1st September, with your first payment on the 1st of October, your theoretical balance after 12 months should be £471,125.75.
Your actual balance would be £471,035.85, which is £90 less.

Therefore, in order to keep your term at 15 years exactly, they'll readjust your monthly payment ever so slightly using the same rate, a term of 14 years and the actual balance as at the first anniversary date.

getmore4less

You can ask barclays to never reduce your payment.

Then it will only change if it needs to be more.

With exact numbers for the year it should be possible to work out what they have done

User6565

Thank you. That’s loads more helpful than Barclays! All they just kept saying was the computer does it automatically but never said why.

Lotak

User6565 wrote: »

Thank you. That’s loads more helpful than Barclays! All they just kept saying was the computer does it automatically but never said why.

Pleasure.

Chances are that the person you're speaking to is just in customer service / administration / arrears management. They won't know how the numbers work.
It's the same in the company I work for.