My mortgage rate is quoted as 5.49% fixed since 2004.
My original mortgage goes back to 1986 when rates were higher, and I started at 11% reduced by some tax scheme called MIRAS to 7.8%.
Lately I've notice that this annual rate is used to find a monthly rate and they add this monthly to my balance.
After I asked they have confirmed in a letter that the monthly rate being used is 5.49/12 i.e. 0.4575% per month.
So now I've been back to them to ask why they use the simple interest rate and then apply it at a compound rate on my balance. If I work out 5.49/12 compound I get 5.64%.
Over the 27 years of mortgage and remortgage even at this low rate I find a 15% difference, which on a loan averaging £40,000 is around £6000.
Is this normal practice? My credit cards use a true monthly rate from the quoted annual rate, it seems a bit steep to take a simple interest rate and then compound it to squeeze a bit more out of me.
My original mortgage goes back to 1986 when rates were higher, and I started at 11% reduced by some tax scheme called MIRAS to 7.8%.
Lately I've notice that this annual rate is used to find a monthly rate and they add this monthly to my balance.
After I asked they have confirmed in a letter that the monthly rate being used is 5.49/12 i.e. 0.4575% per month.
So now I've been back to them to ask why they use the simple interest rate and then apply it at a compound rate on my balance. If I work out 5.49/12 compound I get 5.64%.
Over the 27 years of mortgage and remortgage even at this low rate I find a 15% difference, which on a loan averaging £40,000 is around £6000.
Is this normal practice? My credit cards use a true monthly rate from the quoted annual rate, it seems a bit steep to take a simple interest rate and then compound it to squeeze a bit more out of me.