APR has changed dramatically, is it correct?

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Puesyo

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Hi

I apologize in advance if this seems a little complicated or I do not explain myself very well. We are in the process of setting up a mortgage, we have changed from the previous entity to a new one due to the new one having better fixed rates. Now the new entity has proved to the moment EXTREMELY INEFFICIENT.

So this is my problem: initially they sent us a contract with the wrong amount and period: larger amount than needed (only by 1k) and longer period (25 years instead of 22.5 years). A month later the mistake has been corrected. The amount has gone down to, let's say 299k from 300k and the period is now right (the shorter period is the right one). The rate, since we had it "booked", hasn't changed (4.2 fixed for a period of 5 years). However and since there was a "final date" for this rate (June 2011) the amount of repayments on the fixed rate will be slightly less than five years, that is, 58 repayments instead of 60, provided everything is set up and ready to make the first reapyment in August this year. And here's the question: now the entity in question is telling us that the APR has changed from 4.16 to 4.31.

So basically:

300k at 4.2% fixed for 5 years, 60 repayments at fixed rate and 25 years total term of mortgage, 4.16% APR

299k at 4.2% fixed for 5 years, 58 repayments and total term of the mortgage 22.5 years, 4.31% APR

Is this possible? Are they trying to pull a fast one on us? They have since changed the rates -up- and we're thinking they're not too happy that we're taking the lower rate.

Also, anybody know a financial advisor or similar that, for a fee, can calculate this and see if it's all correct? The solicitor knows about the paperwork but can't advice if these rates are correct.

This is the upteenth mistake that the institution has made. I'm so sick of it, HELLLLPPP please!
 
Is this possible
Click to expand...
In short, I think yes.

Is this correct?
One cannot say without one missing piece of information.

The interest rate that the institution are using beyond the fixed 58/60 period is key. The APR reflects the cost of the loan over the life of the loan. If the rate being used by the bank in their APR calc for the period after June 2011 is less than 4.2, then with the higher rate period being a bigger portion of the life of the loan in the case of the 22.5 year loan (5 / 22.5) versus the original term (5 / 25), then the APR could indeed go up for the shorter term loan.

But of course a bigger APR over a shorter life is still likely cheaper overall than the smaller APR over the longer period.
 
The APR will take into account the future interest rates once your fixed rate period is up, and since tehre were increases in ECB rates lately this is where the differences could be coming from. Correct me if I's wrong, but search on APR and you will see how it is calculated. It is meant to give an indciation of the full cost of the mortgage taking into account converting your mortgage to variable once the fixed 5 years is up.
 
Thanks for that guys. I didn't know the APR takes into account the rate after the fixed period is finished. In fact, Cloughy is right, since the rates have gone up in the last while the variable rate that the contract states we'll go into when the fixed period finishes has gone up from 3.99% to 4.24%. I'd imagine that will account for the difference in APR.

Thanks again, that puts my mind at ease!
 
That's a pretty good 5-yr fixed rate. :D

Who is it with, as even [broken link removed] seem to be 4.65% now for 5-yr fixed.
 
The reason behind it is the variable rate has obviously changed. The fixed rate is still the same, but as the rate after the fixed term is higher the APR is higher.
It's not "puling a fast one" just an accurate reflection of the current interest rate.
 
Irishpancacke it is pretty good alright. It's unavailable now however as we "booked it" before the last raise. I won't mention the institution since I've said that they're so bad... they've been dreadful really to deal with, it was almost not worth the hassle.
 
PuesyO

I don't think that there is any harm in mentioning the institution. A mortgage broker told me that it is no longer possible to "book" fixed rates and you appear to have done so. That would be useful information.

Brendan
 
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