mortgage interest

[boobesque]

hey everybody. imagine i was looking at a website with a list of mortgages, the overall cost for comparison is 5.9%apr and the base rate is 6.05%. what is the interest? what are these 2 things? i thought that the base rate was defined by the bank of england but this site has different base rates for different lenders.

[dzug]

In this context it's the lender's 'normal' interest rate, The actual rate you pay may be less if they are running a special offer or you are regarded as an especially good risk - or could be more if they see you as high risk.

[boobesque]

but this was before any application was made. its on the website for everybody to see, from the CEO of mtv to my postman

[dzug]

I'm pretty certain that the base rate is still what I said. The APR will be a standard way of calculating, taking in to account minor differences in how the lenders actually apply their quoted rate.

[ewand]

dzug is correct! Each of the different lenders will have their own "base" rate, which is usually just above the BofE base rate. They they alter the mortgage "package" depending on the choice of the customer (i.e. fixed rate for 2 years, or tracker to BofE or their own base rate etc.). The risk of the actual customer can also be included too. Hope this helps.

[boobesque]

aha. i thought the BofE base rate was universal to all banks and building societys around the country. i wasnt aware that they differ. this clears up the base rate. now tell me, if you will, the apr is what i use to calculate the interest yes? if the apr is 5.45% apr then i would be paying 5.45% of the total borrowed each year?

[ewand]

The BofE base rate is the same for all banks, but the bank itself generally sets it's own base rate. The APR is the rate that you will be paying (i.e. the extent of interest on your borrowings) however, this will be subject to change throughout the term of the loan (unless you can find a fixed rate for life!). Therefore, in answer to your question, the 5.45% will be the amount of interest added to your borrowings each year.....however, remember this is calculated regularly and you will make payments to "pay off" your debt (if you are capital and interest). Note that as you pay off more, the actual amount of interest you will pay will decrease.....

Hope this helps.

[boobesque]

thank yuo everybody. cleared this up nicely