Now that I am on a lower interest rate will I see more come off the principal loan?

[Daisy09]

Hi there, when I first moved in to my house I had a fixed mortgage rate of 5.4%. When I came off that I went on to a tracker and initally I was paying a higher rate of interest but it has since come way down (happy days!) and I am paying 2% interest. I noticed that when I was on the higher rate for 2 years I had literally paid nothing off the loan amount and I am wondering that now that I am on a much lower rate of interest will I see more come off the initial mortgage loan amount or will it still be a teeny amount? I'm not really sure how it works!

 

[PaddyW]

At the start of a mortgage, you are generally paying more interest than capital. As the years progress the amount of capital increases. You should be getting mortgage statements from your bank yearly which will show you how much capital and interest you pay.

 

[DerKaiser]

Hi there, when I first moved in to my house I had a fixed mortgage rate of 5.4%. When I came off that I went on to a tracker and initally I was paying a higher rate of interest but it has since come way down (happy days!) and I am paying 2% interest. I noticed that when I was on the higher rate for 2 years I had literally paid nothing off the loan amount and I am wondering that now that I am on a much lower rate of interest will I see more come off the initial mortgage loan amount or will it still be a teeny amount? I'm not really sure how it works!

You're right, if the interest rate reduces, the pattern of the capital repayment changes so that you are paying down more capital in the early years (and less in the later years, as the total level of repayments has also come down).