CAM bank calculation of Mortgage rate are the incorrect?

Hello,  

     finally we have had our six month mortgage review and the rate has dropped from 6.1% to 4.5%, good news but I think it should be lower, so does this sound right.

CAM bank are basing the mortgage rate on the 6m Euribor + 1.1%, this is being recalculated two months before the change on Feb 28th, this means Dec 28th 2008 is the rate they should use. 

 According to Euribor website the rate around Dec 28th should be around 3.016% so +1.1% makes this around 4.16%, around a 10% saving.

Any thoughts on this?

- Should all banks use the Euribor or do they have there own tables that may be higher/lower?
- Why do a 6 month review based on the rate 2 months prior?

Regards

Hi Michael.

The new rate seems there or thereabouts although, like you, it seems that rate should be closer to 4% rather than that extra 4.5%! Have you asked them to give you the basis of the new rate; you may get a reduction if you can show otherwise.

Each bank has it's own method of calculating the reset rate; CAM's is certainly one of the kinder in this market.

And, no, whilst most use Euribor, several use an index abbreviated as IRPH. There are various such index but the Caja is that used by most. This index takes the average rate over a much longer period, supposedly to flatten that trend line but, unfortuantely, due to the speed and extent of the ECB Base Rate reductions, those borrowers on this index are being heavily 'penalised' at present. In fact, as the Euribor based average 'pay rate' now should be closer to 4% (and lower for new business) and the IRPH at least 5.5%, it may even be worthwhile for borrowers on IRPH to consider asking their lender for a switch to Euribor! This will come at a cost so that has to be taken into consideration against the interest rate gain.

Hi Michael when the pay rate is adjusted whether it be six monthly or annual review it is invariably based on the published Euribor setting of two months previously as the lender is required by law to notify you on your monhtly mortgage slips of what the new payment will be (if you study your monthly slips you will see there is an awful lot of data on there). Using the rate two months previous allows for them to process the necessary administration - one could argue that with modern technology this really is an over allowance but the Spanish have a tendency to stick with tradition. While it has worked against you at this setting when rates inevitably rise again (assuming Nostradumus prediction does not come true) then you will derive some benefit from the same methodology.

Regarding the date of the setting they do not use the specific rate on the exact date of maturity but they use an official monthly mean for Annual or 6 monthly Euribor recorded by the BOS for the month of December. Dont ask me how the official average is calculated - when I have previously tried to work it out my simple mehod ot taking every days benchmark and dividing by the number of days in the month doesnt seem to work - it is possible they are using a 360 day year as some money market instruments do but why on earth they would, again i have no clues.

 HI guys, can anybody explain something about my Cam bank mortgage for me.  Our month 7 payment came out on the 27th of May showing a new rate of 3.32%.  In other words we have just finished the first 6 months fixed payments which were at 6.47% but our paperwork shows that we should have a fixed rate from month 7 for 4 years at 4.97%.  This seemed like good news but on the 28th of May a payment was taken from our account and is listed as Cam P. Deriv .  Does anybody know is this related to the mortgage, is it related to the difference in the percentage rates (although it would make the mortgage over 7%) or what the hell is it????

Would appreciate very much any explanations!!

Hi Beano,

Sounds like they have made an error in the product that they changed you to i.e. Variable rate instead of a Fixed rate. Once they realised their error they took the extra funds to compensate. Of course you need to challenge them about this and get it rectifed. Re your comment about the 7%; is this based on the 2 payments that were taken and you are assuming this is your new monthly repayment?   Could it be that they have also overlooked the fact that you are on an Interest Only basis period?