interest calculations on tracker repayment mortgages

Rik2008

Hi I have a tracker repayment mortgage which tracks 0.29% above the bank of England base rate. I have had it for over a year now and in that time interests rates went up by a whole percent and have now subsequently gone down. My mortgage provider has kept my repayments the same for all the months however when I called them recently regarding the recent interest rate cuts they said that i could factor that cut into my repayments and therefore pay less each month but they say I am in fact overpaying and paying off more of the capital by keeping the repayments the same but Im not sure whether to change my repayments so that I am tracking it alongside the BoE rate. Because the system of calculating the interest and repayments is fairly complicated I am in effect taking the bank's word for it that they are using these extra amounts I have 'overpaid' to pay off the capital when I am probably having the wool pulled over my eyes, and being shafted by them!! I know I am probably being cynical but was wondering what other people would do in this situation.
1. Keep paying the same amounts each month even tho interest rates have gone down so I am supposedly paying off more of the capital or
2. Reduce my repayments so Im only paying the capital and the lower percentage interest amount

Sorry its a bit waffly!

Tiddler_2

You are on a budget plan/annual review scheme - they were used quite abit by mortgage companies in the past (and obviously still are by some)

Personally I don't like them as I have seen the damage they can do - particularly during a period where interest rates have increased for 2/3 years on the trot.

Basically your payment is set based on your balance and interest rate payable on 1 particularly day.

At the Halifax it was on 1st April each year. If interest rates increased, then whilst your payments stayed the same the interest charged was increased.

If rates go down then you are overpaying, and so your balance goes down over that year more quickly than it should have done under normal circumstances.

The situation that I saw was that a customer who had a HLC did not have their mortgage payments recalculated despite rates increasing throughout the year. (The Halifax would only recalculate if the customer asked, or if rates changed by 3%, i think it was). The mortgage was interest only and so a year later the balance had increased significantly, due the HLC, plus interest on the HLC & the mortgage.

Personally I would rather know what I am supposed to pay and then let the overpayments be of my own choosing!

Hope that helps to explain it.