ECB cuts base rate to 0.05%

That means those on Danske ECB+0.5% trackers are now paying €45.83 interest per month per €100,000 mortgage.
 
Those on interest only trackers must be paying very low amounts. We are on a ecb plus .75%. We pay 850 a month. Never checked how much of that is interest versus capital.
 
Those on interest only trackers must be paying very low amounts. We are on a ecb plus .75%. We pay 850 a month. Never checked how much of that is interest versus capital.

It's very easy to check. If your balance is €300,000 @ 0.9% (before today's cut) = €2,700 a year interest or €225 per month, meaning the capital element is around €625. The interest is a bit less as you are paying off so much capital each month.

But it's best to look at your statement for last year, and you will see how the balance has reduced. People with tracker mortgages are paying off the capital very quickly.

Brendan
 
2006 335k @ 4.54% = €15,209 int pa = €1,267 int + €193 cap = €1,460 pm

2014 274.7k @ 1.73% = €4,753 int pa = €396 int + €738 cap = €1,134 pm
 
People with tracker mortgages are paying off the capital very quickly.

Brendan

Brendan,

This confused me a bit - the reducing interest rate hasn't increased the capital repayment rate necessarily. Only if we decide to maintain a constant repayment per month will we pay the capital down quicker. Do I understand this correctly? I'm sure most people don't do this, and simply enjoy the extra cash in their pocket each month.

C
 
Brendan,
This confused me a bit - the reducing interest rate hasn't increased the capital repayment rate necessarily. Only if we decide to maintain a constant repayment per month will we pay the capital down quicker. Do I understand this correctly? I'm sure most people don't do this, and simply enjoy the extra cash in their pocket each month.

C

This may help as an example.

Repaying 100k at 1%
Total Monthly Payment 321.69

Sep €83.42 €238.27 €99,761.73
Oct €83.22 €238.47 €99,523.26
Nov €83.02 €238.67 €99,284.60
Dec €82.82 €238.87 €99,045.73

Repaying 100k at 2%
Total Monthly Payment 369.67

Sep €166.75 €202.92 €99,797.08
Oct €166.41 €203.26 €99,593.82
Nov €166.07 €203.60 €99,390.23
Dec €165.73 €203.94 €99,186.29

So even though you are paying less at 1%, you are taking a bigger chunk out of your principle.
 
jdwex's example is a good way to explain it, because it's quite hard to explain the theory.

When interest rates fall, the interest charged each month falls. But the repayment falls by less because the capital element increases.

The best way to see it is to use this calculator which allows you look at two mortgages at the same time.

http://www.loanclc.com/

Brendan
 
So your saying it's possible that you will pay back your loan quicker than the stated timeframe ? It doesn't really make sense to me , when interest rates go down your repayment goes down each month surely you still have to pay a 20 year mortgage in 20 years and your not going to finish a year early or am I missing something ?
 
I'm with Fella on this. I thought the payments are recalculated so that your balance is zero at the end of the original term. On both schedules, the amounts outstanding taper to zero.

If you extend the example above to include all months, by my calculations around month 194 or so, you start paying off the capital faster on a monthly basis at the higher interest rate (i.e. the capital portion of the payment is greater from then on at 2% than at 1%), so even though there is more capital outstanding at the higher rate, you're paying it off faster, so you will end up at zero outstanding after 30 years.

The only way to pay it off faster is if you accelerate the payment schedule yourself. I hive off the surplus (not every month, mind) to a Rabo account and make a one-off payment about once a year.
 
Yes, the repayment period stays the same. The thing aout paying principle off more quickly is you are in a better position if interest rates go up..
 
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