Re: People vs Banks

[Daniel Davies <dsquared@xxxxxxxxxxxxxxxx>]

hmm, sounds expensive.

 

nothing preventing you from doing this in principle, but if you were going to run a mortgage bank on these principles you'd need to square the other side of the book away by finding some depositors who didn't mind a similar schedule of repayments being applied to their deposits.  I'm not saying it couldn't be done, but they would most likely demand a significantly higher rate of interest to compensate them for the fact that it wasn't compounding at the same rate and this might be high enough to nullify the initial advantage.

 

best,

dd

-----Original Message-----
From: PEN-L list [mailto:PEN-L@xxxxxxxxxxxxxxxx]On Behalf Of Charles Brown
Sent: 14 March 2005 18:50
To: PEN-L@xxxxxxxxxxxxxxxx
Subject: People vs Banks

Isn't the rule that mortgage payments are high proportion paid to interest and low proportion paid to principle in early payments an arbitrary exercise of banking power ? If higher proportions of early payments were used to pay off the principle, the principle would be paid off sooner and the total amount of interest paid over the whole mortgage would be less than under the current rule.

 

We need a law that the proportions of each mortgage payment attributed to principle and interest should be the same as the proportions of the interest rate to the principle.

 

If the Interest rate on a mortgage is 7%, then each mortgage payment should be divided up 7 parts to interest to 100 parts to principle.

 

Charles