Do mortgage payments go down over time?
Not by themselves. A repayment mortgage payment is set so it stays the same for the whole term while the rate is unchanged. What falls over time is the share of each payment that is interest. The payment itself only moves when the rate changes, the balance is recalculated or the term is changed.
What changes inside a level payment
£200,000 over 25 years at 5% is about £1,169 a month, and at the same rate it is £1,169 in the last month too. In the first month about £833 of it is interest and £336 comes off the balance. By the final years almost the whole payment comes off the balance.
That is why the balance falls slowly at first and quickly at the end, and it is set out month by month in why is my mortgage balance not going down.
When the payment does move
- The rate changes. When a fixed period ends, or a tracker or variable rate moves, the payment is recalculated. Five years into the example, with about £177,160 left and twenty years to run, a rate of 4% would make the payment about £1,074; a rate of 6%, about £1,269.
- An overpayment is applied to the payment. Where a lender recalculates after an overpayment, the payment falls against the smaller balance. £10,000 overpaid at that five-year point would bring it to about £1,103, around £66 a month less.
- The term changes. A shorter term raises the payment; a longer one lowers it.
- The mortgage is interest-only. The payment is the interest alone, so it moves with the rate and the balance does not fall.
Why it seems as though it should fall
A falling balance makes it natural to expect a falling payment. The payment was worked out at the start to clear the balance by the end of the term, so the balance falling is the plan working, not a sign the payment is too high.
Questions people ask
Why has my mortgage payment gone up when I have not borrowed more?
Usually because the rate changed: a fixed period ended, or a tracker or variable rate rose. The payment is recalculated on the balance and term left, at the new rate.
Do overpayments lower my monthly payment?
Only where your lender applies them that way. Some reduce the term instead and leave the payment unchanged. Your lender can tell you which applies to your mortgage.