| APR or Annual Percentage Rate of Interest was | | | | are also providers who calculate the APR on all the |
| devised as a way of allowing consumers to compare | | | | required areas as they are not required to apply |
| different financial products. This was and still is a | | | | certain costs. |
| great idea. However, there are a number of issues | | | | The simplest answer to all this is to standardise the |
| when it comes to using APR to compare mortgages. | | | | calculation by using the “True Cost” instead |
| Both credit card and unsecured personal loan APR | | | | of APR. Insist that all providers have to base APR on |
| give a fair and reasonable indication of the annual | | | | the total of all costs, including legal fees, survey fees, |
| cost and more importantly appear consistent across | | | | exit fees, all admin fees, transfer of fund fees, etc. |
| providers. | | | | All mortgage best buy tables should be obliged to |
| Not so with mortgages, there can be wild and | | | | rank their table according to “True Cost”. |
| mystifying differences in the APR from one | | | | My own observation is that when people are looking |
| mortgage to the next. At the top of the mortgage | | | | for a mortgage they are conditioned to look at the |
| best buy tables the APR can be higher than the ones | | | | headline rate and not the APR. This is very different |
| below it. So is it a best buy? It may well be. It is | | | | to how a consumer goes about comparing other |
| therefore fair to assume that APR is failing in its task | | | | financial products such as credit cards or unsecured |
| of helping consumers to compare mortgages. | | | | personal loans. |
| The reasons for the differences are pretty straight | | | | My suggestion to anyone out there looking for a |
| forward: | | | | mortgage is, think about 4 key bits of information: |
| 1. Each Provider Calculates APR slightly differently | | | | - Headline Rate |
| 2. The way interest is applied i.e. daily, monthly, | | | | - Fees |
| annually | | | | - APR |
| 3. Inclusion or Exclusion of certain fees | | | | - When the deal stops what happens?(extended |
| But is there anything more sinister going on? Have | | | | tie-ins, move to the providers Standard Variable |
| the product marketing teams been massaging figures | | | | Rate, discounted rate, etc) |
| a little too much? | | | | After this initial comparison you have to check out |
| Unfortunately for the conspiracy theorists among us | | | | the finer details, it is dull but it is necessary. The devil |
| the answer is a big fat no. There are providers that | | | | is always in the detail. |
| add every cost associated with the mortgage. There | | | | |