In relation to redemption statements, what is the significance of the 'daily rate' when redemption is delayed?

• A. daily amount which must be added to the stated redemption figure for each day that redemption is delayed
• B. daily interest charged by the bank on the mortgage
• C. a penalty for late completion
• D. the cost of a new mortgage

Answer: (A)

The daily rate is the cost of delaying the final discharge of the loan. When you redeem a mortgage, the lender gives a redemption figure that's valid for a set period. If completion happens after that period, a daily rate is added to the figure for each day of delay to reflect interest that would accrue on the outstanding balance and the lender’s costs while the loan is still in place. So the total amount you must pay increases with each day the redemption is delayed. It’s not a penalty, nor the cost of a new mortgage, and it isn’t simply the lender’s ordinary daily mortgage interest—it’s specifically the daily amount used to compensate for the delay in final settlement. For example, if the stated figure is £300,000 and the daily rate is £20, delaying by 5 days adds £100 to the amount due.