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Mortgage interest information

Information on mortgage interest, from interest changes to how interest is calculated.

Depending on what type of mortgage you have, we may vary the applied rate during the mortgage term.

If you have the Standard Variable Mortgage Rate

We may change the rate at any time. This will usually be because general interest rates have changed or to reflect market conditions. But even then, the rate will never be more than 2% above the Bank of England base rate.

If you have a Fixed Rate Mortgage

The interest rate will not change throughout the fixed-rate period.

If you have the Homeowner Variable Rate or the Buy-to-Let Variable Rate

We may change the Homeowner Variable Rate or the Buy-to-Let Variable Rate at any time. Usually because general interest rates have changed or to reflect market conditions. But it can only happen for one of the reasons detailed in our mortgage conditions.

If we make a change to an interest rate, you will be notified of the change before it happens. We will write to you with details of the new rate and:

  • advertise the change in at least two national newspapers
  • and, if we advertise, notices will also be displayed in TSB branches, giving all the details

If you are coming to the end of a tracker or fixed rate period, we will normally write to remind you and to give you details of any payment change.

Interest is calculated on all new mortgages using the balance outstanding each day (daily interest) and it's then added to the mortgage at the end of each month. This means that whenever your balance changes - for example when you make a payment, interest starts to be charged on the new balance straightaway.

If you already have a mortgage with us and are moving home or borrowing more with a Homeowner Loan, it may be that, currently, interest on your existing mortgage is calculated annually. If this is the case, we will change it to daily interest when your new mortgage or loan starts so that interest on your whole mortgage will then be calculated daily.

Even if you're not moving or borrowing more, if your interest is calculated annually, you can ask us to calculate it on a daily basis instead.

If the interest on your mortgage is charged on a daily basis, any extra payments you make will reduce the balance straightaway, and interest will then start to be calculated on the lower balance immediately.

You will often see two rates quoted by lenders - the 'applied' rate and the 'APRC'. Like this for example:

  • applied rate for the term of the mortgage 5.19%
  • the overall cost for comparison is 6.2% APRC
  • the applied rate is the actual rate used to calculate the interest due on a loan, i.e. it's the rate you pay

So, in the example above, the actual interest rate charged is 5.19%. Depending on what type of mortgage you have, this rate could change. See the previous section, 'Rate changes', for more information about this. The interest due is usually payable monthly.

The APRC (Annual Percentage Rate of Charge) is intended to help you compare the true overall cost of loans offered by different lenders - so it takes into account not only the applied rate, but any costs such as product, valuation and administration fees, the term of the loan and whether it is on an interest-only or repayment basis. This means that two mortgages could have the same applied rate and the same mortgage term, but if one had more charges for example, then the APRCs could be different. You will always see an APRC quoted alongside the applied rate in any mortgage advertising. The APRC quoted is expected to represent the APRC at or below which at least two thirds of the target audience will be charged.


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