Interesting Info 28 Apr 2015

IMPACT OF INTEREST RATE VARIATIONS

The Variable Rate Lease Purchase Agreement is linked to Aldermore Reference Rate.

Whilst there is a set monthly payment taken by direct debit, any variation from the assumed interest as a result of changes in Aldermore Reference Rate will be added or deducted at the end of the agreement or at the time of early redemption.

The following examples provide an illustration of the impact resulting from a 1% variation in Aldermore Reference Rate:

 

 

Example 1:

Amount Financed: £75,000

Repayments: 48 monthly payments of £1,898.60

Assumed Funding Rate: Aldermore Reference Rate of 1% + 8.9% = 9.9%

 

Increase of 1% one year after the start of the agreement when the capital outstanding  is £58,921

would result in additional interest charges of £1,178.33*

Increase of 1% two years after the start of the agreement when the capital outstanding  is £41,192

would result in additional interest charges of £517.14*

Increase of 1% three years after the start of the agreement when the capital outstanding  is £21,611

would result in additional interest charges of £128.04*

 

Example 2:

Amount Financed: £125,000

Repayments: 48 monthly payments of £2,240.20 followed by a final payment of £50,000

Assumed Funding Rate: Aldermore Reference Rate of 1% + 7.9% = 8.9%

 

Increase of 1% one year after the start of the agreement when the capital outstanding  is £108,579

would result in additional interest charges of £2,931.20*

Increase of 1% two years after the start of the agreement when the capital outstanding  is £90,663

would result in additional interest charges of £1,663.30*

Increase of 1% three years after the start of the agreement when the capital outstanding  is £71,059

would result in additional interest charges of £690.02*

*Additional interest charges are collected with the final payment or at the time of early redemption

 

 

Should there be an increase of more than 1%, the additional interest charges would be approximately doubled if the increase was 2% and approximately trebled if the increase was 3% etc.

IMPORTANT: Please note these examples are approximate and are for illustration purposes and the impact of any interest rate variation would be reduced in the event of early redemption. The examples would also differ should there be a difference in the timing of any interest rate variations.

 

Should you have any questions or require additional information, please contact us and we would be pleased to provide clarification.