Research suggests new measurement for loan costs
Published on : 21/09/2007
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The Council of Mortgage Lenders (CML) has suggested a new method to compare the cost of loans.
Research by the association has focussed on how the Dynamic Annual Rate (DAR) could replace the Annual Percentage Rate (APR) and help consumers have a better understanding of interest rate changes.
The key differences between the two methods is that the DAR is calculated for the full time that the loan will be kept for, while it also takes into account all of the charges accrued over the same period.
CML director general Michael Coogan commented that, although the findings didn't state that the APR was no longer relevant, the new method could prove easier for consumers to understand.
"The DAR provides a useful basis for discussion on the ways mortgage lenders can make consumer information as comprehensive, accessible and meaning as possible," he explained.
Proposals for the new rating system came as Alliance and Leicester today announced plans to revise its variable mortgage rates.
The company's head of mortgage products Richard Taylor said the decision to increase the rates, which include a 0.34 per cent increase on the company's FeeSaver Tracker, were made to offer consumers "the best possible deal for their needs".
