According to research from BM Solutions, out of 310 brokers questioned, 68 per cent believed APR was not an appropriate feature of today’s market, with only 22 per cent insisting an alternative was not needed.
However, the survey also revealed that 77 per cent of advisers were unaware of recent research published by the Council of Mortgage Lenders, which examined using a dynamic annual rate (DAR) for comparing mortgage products.
Phil Rickards, head of sales at BM Solutions, said: “APR has been the established calculation basis in the industry for some time. Recently, however, professionals have been questioning its validity in today’s market. Although we should steer clear of swamping the market with different calculations, another option may be worth considering if brokers believe it will support best advice. However, any solution must also be helpful for the customer.”
DAR would be calculated over the length of time the mortgage is likely to be kept, for example, during the original deal period, compared to APR, which is measured over the entire life of the mortgage.
Simon Chalk, mortgage planner at Mortgage Portfolio Services, backed the end of APR. He said: “APR is outdated and misunderstood. It assumes continuity with the product but you don’t keep clients on the same product for 25 years. Lenders can move their standard variable rate, which ruins the calculation anyway. We work with ‘total to pay’ as people can understand pounds and pence and it shows which product is better value.”
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