How Fixed is a Fixed Term Mortgage?

Diego_Francis

:cool:Recently have been making overpayments and calculating how much of my 10% Overpayment Limit is left for the year.

I discovered since doing this, each month the interest has been different.

The following is an example and not accurate to my financial circumstances:

April I pay £580 on a new 5 year fixed term loan of 100,000. The interest rate is 3%.

After deducting the interest from this month I have £99,670 left.

May the same months payments are made however I'm left with 99,344.99 at the end of the month. This calculates at 3.07% interest.

June the interest is 3.04%
July it's 3%
August it's 2.98%
September it's 3.01%
And so on.

Yes this example isn't accurate but just to highlight the difference in interest rates per month.

Is this correct for a fixed term mortgage?
What causes these fluctuations in interest rates per month?
Is my bank screwing me over? Haha.
Why is this happening and has the same occured to you?

kerri_gt

June the interest is 3.04%
July it's 3%
August it's 2.98%
September it's 3.01%

Take those rates, divide by 4 (months) - you get 3% (or 3.0075%)

Thrugelmir

Diego_Francis wrote: »

Yes this example isn't accurate but just to highlight the difference in interest rates per month.

The number of days (on which interest is charged) differs month to month over the course of the year everything averages out.

[Deleted User]

Annual interest rate which is calculated daily (usually).

So you have interest of (interest rate / 365) x (number of days in month)

Evens out over the year

Diego_Francis

Thanks all who replied. Glad it does even out. I was worried for a moment there! Phew!