Mortgage monthly payment increase - within term - why?

BarsianLewis

Good morning, Nationwide has increased my monthly payment in March from February by £5.39. I am within term - my current mortgage term finishes on 31st August. I have made maximum overpayment. When I asked N/wide, the person said ‘sometimes payments are adjusted in the final stages of a mortgage term’. I told them I have a fixed rate mortgage for a reason - teacher/fixed budget and why now is the monthly payment increased and they said I got a letter on 4th March. No letter, and currently awaiting another.
is this usual to have a monthly payment increase? It’s not happened previously. Thanks in advance for advice.

amnblog

29 days in February, 31 in March.

When calculating amortisation (the speed of paying off a debt), lenders have to account for differing days each month. In a leap year an extra day's interest can cause a complication, perhaps a £5.39 complication in your case.

BarsianLewis

Thanks very much for your comment /advice. Do appreciate it. I hadn’t thought of the leap year. I was wondering if it would revert back to normal for April, after a normal month, so we shall see. Cheerio, thanks again.

moneysaver

amnblog said:

29 days in February, 31 in March.

When calculating amortisation (the speed of paying off a debt), lenders have to account for differing days each month. In a leap year an extra day's interest can cause a complication, perhaps a £5.39 complication in your case.

And Nationwide did not explain this. Poor customer service from Nationwide.

Moneysaver

BikingBud

amnblog said:

29 days in February, 31 in March.

When calculating amortisation (the speed of paying off a debt), lenders have to account for differing days each month. In a leap year an extra day's interest can cause a complication, perhaps a £5.39 complication in your case.

I don't get that. If it's fixed payment it's fixed payment.

If you have overpaid, within allowance, that will reduce the capital. 

Whilst the interest is calculated daily and for a repayment mortgage it will be different for all months, as the number of days are different and as the capital reduces the accrued interest reduces and the ratio of capital to interest shifts from interest to capital. Compounding works both ways!

All absolutely normal but if systems cannot cope with leap years and different days in the month then we really are doomed.

Logically however, the payments should remain the same, until the final payment when that should cover (a) the final agree payment from a fixed payment plan or (b) the final payment to clear the debt.

BarsianLewis

Thank you Amnblog and BikingBud for your posts/ thoughts. As the N/wide person said sth about readjustments being made towards the end of a term, the leap year May make sense perhaps though the increase if £5+ is quite a lot for a month - though I am not a Maths’ teacher…. So numbers are not my forté… I don’t remember any increase 5 years ago or within the term ever yet perhaps I wasn’t looking. I’m due to get a letter to replace the one apparently sent on 4th March - no letter rec’d - so perhaps it’ll be explained then. Still a little flummoxed as I also thought a fixed rate ensured a fixed amount for monthly payments full stop, the whole point being able to budget accordingly each month. Ah well… we shall see. Thanks again. All the best