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confused with HSBC Commercial Mortgage Loan and Debit Interest Fee........Please help!!

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I got a commercial mortgage (interest and capital repayment) of £154000 with HSBC in Jan2010. I am paying interest rate at 3.25% and capital repayment £792.08 each month.


This is the term on the facility letter:

Interest Rate

Interest on the Loan will be charged at 3.25% per annum over the Bank’s Sterling Base Rate as published from time to time or as renegotiated under the Renegotiation provisions set out in the General Terms and Conditions.


The Loan will be repaid by monthly repayments of £792.08, inclusive of interest, commencing one month after drawing. In any event the Loan will be repaid in full by the end of the Term.


Recently, I started to check my mortgage account and realised I am not only paying £792.08 and also there is a payment debit interest fee (around£470-£499)each month. I emailed my bank manager about this charges and he replied:


"The interest rate being charged is an annual rate and there fore we have to break this down for a monthly interest charge. There are a number of ways that banks calculate interest and one way is to use the highest balance during the year and just charge monthly interest on that. This is more expensive then if the interest is calculated daily and then charged on the monthly date, this takes in to account that the loan balance is reducing and you pay less interest. Therefore to be fair HSBC uses the second method so that you only are charged interest on the actual balance and not a higher one. "


I have 2 other mortgages with other banks and they are also interest and capital repayment. I only have to pay one amount that is including both each month, so I dont know why HSBC are charging this extra fee. I am not sure if I really suppose to pay those fees or this is another hsbc managed loan mistake?


Thanks for advises.

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