Your summation is as follows.

The calculations are correct but it seems an overcomplicated way of looking at it.

Now the borrower owes €76,841.86 which he would now owe had he been charged the correct level of interest and has cash of €5,682.18

The way I see it is as follows :

From your first set of calculations (3% per year), the total repayment for each year (Principal +Interest) is €6,655.20.

So, for 5 years, the total repaid is €33,276.

From your 2nd set of calculations (1% per year), the total repayment for each year (Principal +Interest) is €5,518.68.

So, for 5 years, the total repaid is €27,593.40. This is what should have been repaid.

So, the overpayment is (€33,276 - €27,593.40 i.e. €5,682.60).

So, the bank should refund you this overpayment of €5,682.60, and set the outstanding amount to what it should have been if you had been on the 1% rate i.e. €78,841.86.

Is this too simplistic ? Maybe there is a reason to do it as you have shown and I am missing it.