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Interest rate change

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Im a bit confused.  Im coming to the end of a fixed term and being moved to the SMR.  However even thought the SMR is higher than my current interest rate, my monthly payment has reduced. Why?

Also the term was for 5yrs, but the mortgage doesnt clear until 5yrs 3m.  I havent taken any mortgage holidays or missed any payments, so why do i still owe an extra 3m money?




Comments

  • K_S
    K_S Posts: 6,877 Forumite
    1,000 Posts Fourth Anniversary Photogenic Name Dropper
    edited 20 January 2021 at 10:34AM
    flea72 said:
    Im a bit confused.  Im coming to the end of a fixed term and being moved to the SMR.  However even thought the SMR is higher than my current interest rate, my monthly payment has reduced. Why?
    @flea72 Could be due to having made substantial overpayments during the fixed term.

    I am a Mortgage Adviser - You should note that this site doesn't check my status as a mortgage adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice. 

    PLEASE DO NOT SEND PMs asking for one-to-one-advice, or representation.

  • getmore4less
    getmore4less Posts: 46,882 Forumite
    Part of the Furniture 10,000 Posts Name Dropper I've helped Parliament
    Not all fixes are a multiple of 12months, many are to a date.



  • flea72
    flea72 Posts: 5,392 Forumite
    Part of the Furniture 1,000 Posts Combo Breaker
    No overpayments
    ok will look for end date on paperwork.  But if i asked for a 5yr mortgage, I naively thought it would end after 60m not 63




  • MWT
    MWT Posts: 10,209 Forumite
    10,000 Posts Fifth Anniversary Name Dropper
    edited 20 January 2021 at 11:22AM
    flea72 said:
    No overpayments
    ok will look for end date on paperwork.  But if i asked for a 5yr mortgage, I naively thought it would end after 60m not 63
    Is there some confusion here between the mortgage term and the length of the fix?
    Was this actually a new mortgage that you first started 5 years ago, or was this the end of a 5 year fix with the mortgage having been started some time before the fix started?

  • flea72
    flea72 Posts: 5,392 Forumite
    Part of the Furniture 1,000 Posts Combo Breaker
    It was a 5yr fix at 1.89%.  The mortgage was taken out 5yrs ago, with a 5yr term.  Having now looked at the paperwork, it says agreed redemption date april 2021.  I wrongly assumed that a 5yr mortgage, would finish 5yrs later at the same time as the fixed rate.

    Now if someone could please explain why an SMR @ 3.9%, means im paying £8m less than my fix @ 1.89%.  I know the amount is negligible, but i expected it to increase
  • getmore4less
    getmore4less Posts: 46,882 Forumite
    Part of the Furniture 10,000 Posts Name Dropper I've helped Parliament
    edited 20 January 2021 at 5:28PM
    What's the amount payment and full term?
    At start of the fix and the end of the fix.

    I suspect it might be a  timing of when the calculations are done and how much term is included.
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