Mortgage costs more as term progresses?

[billy-bob]

So I was putting together some figures over the weekend, and I made a sheet of the ECB rates vs what I pay in mortgage amts per month. My records only go back to 2011 at the moment, but I'm a little confused by what I found.

In 2011, with the rate at 1%, I was paying 789.49 pm on my mortgage.
After some rises and falls, the rate was once again at 1% in early 2012, but now I was paying 790.31 pm.

Same with 1.25%: 811.36 up to 811.43. The jump is less noticeable there, but the timeframe is shorter.

I assume the maths is correct, but I just can't get my head around it. I assume they're recalculating my interest based on the amt due in the time left, and because that's not coming down at the same rate per month (based on how many days in the month) the numbers are slightly different.

It's not an issue, I'm just interested in the maths behind why me paying 1% in Mar 2011 means payment of X, and me paying 1% in Jan 2012 means payment of Y.

 

[STEINER]

My tracker mortgage repayment only changes if

a/ ECB rate changes
b/ TRS changes
c/ bank does some adjustment when they find they have screwed up

PTSB gave me the equation they use to calculate my monthly charge and when I subtract the TRS, it equals the repayment amount.

 

[Brendan Burgess]

This is what I think is happening.

A lender calculates a level repayment every month until the end of the term.

If the interest rate rises, the total repayment rises, but the capital element falls. For example:

100,000 @ 1% for 20 years = a repayment of €459.89, of which €376.56 is capital
100,000 @1.5% for 20 years is a repayment of €505.88 of which €339.21 is capital.

So after a few years of rate rises, the capital balance is higher than it would otherwise have been.

Therefore when the rate falls back down to 1%, the actual repayment is slightly higher.

 

[billy-bob]

Thanks Brendan, I think that's what's going on, but I couldn't illustrate it as well. I reckon if I knew what my capital was in Mar 2011 when I was X and what it was in Jan 2012 when I was paying Y, your example would bear it out, my capital would not be at the level in Jan 2012 that their sums in Mar 2011 was assuming. Makes sense, even though it does make my head spin.