BBC Mortage Calculator error?

Yes. One of them is calculating payments based on 120 months at 0.43333% per month, the other is calculating payments based on 10 years at 5.2% per year, and dividing the answer by 12 (actually I make it £544.86).

I don't speak spreadsheets, they're horrible nasty things, so I don't understand this PMT stuff.

But I think, based on what you've written above, you'll find you get the same answer if you omit the "*12*, and move the "/12" to the outside.

What they "know" that you don't is that some lenders do in fact work it out by the BBC method, but the more reputable ones do it right.

My Excel spreadsheet gives £544.86. That is using the formula =PMT(Rate,Term,Principal,0,0)/12

The formula gives the annual payment, which you have to divide by 12.

The other formula =Principal*(Rate)/((1+Rate)^(-Term)-1)/12 gives the same answer.

You are compounding monthly.

Try this one:

Thanks for the explanation - makes mathematical sense but as for the lenders and the BBC's policy...

So is the BBC using a calculation method the same as or different to the majority of lenders and where do either state what method they are using?

TIA

G.

Difficult to say. It used to be the case that building societies were the "dodgy characters" who took your monthly instalments, stashed them in a non-interest-bearing holding account, and didn't apply them to the loan account until the end of the year, as an annual payment. They are the ones who in effect are swindling you out of the difference. The banks, however, were the more honourable ones, and applied the monthly payments to the loan account monthly.

Now that a lot of building societies are calling themselves banks, it's worse than universities where you don't know if they're really just trumped-up pollies, as some BSs may have cleaned up their act, some not.

You need to look at the fine print. :-(

Its all down to APR again.

The annual B/Socs arent really ripping you off, if they did it the other way then the quoted notional interest would change.

I'm starting a movement for hourly accrual with bi-fortnightly application. If I pay in at 9.01hrs, because of the number of Bank Holiday Mondays in a year (excluding leap years) I reckon I could be er, er, er, er,,,,,,,,,,,,

Unfortunately, often they don't tell you what their APR is unless you ask for a quote. All they give in the adverts is a "typical" APR.

You mean quoted nominal, not quoted notional. Indeed, but they are ripping you off in the sense that they're misleading you. The APR is no use because it's only "typical", and so all you really have to go on is the contract rate, but you need to be Sherlock Holmes to find out whether they're charging X% per year or (X/12)% per month.

Why stop there? The only way to do it properly is with continuous application and with no accrual. All the time your balance rises continuously, following an exponential curve with such an exponent as would make the balance rise by a factor of (1+APR/100) over the course of one year if nothing else were to happen. Then, your payments in or out, in whichever microsecond they happen to be made, will adjust the balance at that very instant.

Naturally, the curve keeps going exponentially 24/7. None of these namby pamby bank holidays, you know. Money never sleeps.