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APR labelled “useless”

Annual percentage rates – the FSA&#39s preferred means of mortgage price comparison – have been slammed as a “useless” measure of mortgage costs.

If CP146 proposals are agreed, APR will be a central element of financial promotions produced by intermediaries and lenders.

But critics say APR cripples product transparency. Frank Chacko, associate at Hewitt Bacon & Woodrow, says: “Borrowers are given the relative costs of a 25-year mortgage as an APR, when in fact they need to compare prices in a shorter time frame since people remortgage far more frequently.”

Redemption penalties and discount timing can both make mortgages shape up very differently when compared over a shorter term.

“The relative costs over the four-year time frame of an average mortgage are unrelated to what customers are shown for a 25-year loan.”

In CP146, the FSA admits there are “shortcomings” to the APR. It says: “The formula has not kept pace with developments such as cashback and current account mortgages.” But it proposes to make advertisers highlight product pros and cons to go some way to ensure APR is not misleading.


MX in Mortgage Alliance deal

The Mortgage Alliance &#45 the Scottish Mutual and Scottish Provident mortgage club – has launched a self certification discount product from Mortgage Express, one of the three new lenders to be added to its panel in the last month. The deal applies to minimum loans of £50,000 and offers 1.05% discount for two years with […]

New adverse credit fixed products from Genesis

Correspondent lender Genesis Home Loans has released four new, low cost, fixed rate products as part of its Planets & Moons adverse credit range. The rates – which are all fixed until 1 October 2003 – are dependent on the LTV of the mortgage required and start at 4.99% up to 65% LTV. At 75% […]

SPML introduces proactive fax notices for packagers

Southern Pacific Mortgage Limited (SPML) has enhanced its service to packagers by introducing an automatic fax notification every time a condition stipulated on a mortgage offer has been satisfied. This &#39real-time&#39 fax notification is triggered by the data being entered on SPML&#39s own computerised case tracking system, and it is already being viewed as a […]

NatWest shows confidence in brokers

NatWest&#39s decision to roll out its current account mortgage to intermediaries has been welcomed as a “vote of confidence” in the broker sector. NatWest One combines the home loan with a bank account, overdraft and savings in one account. It was launched solely at branch level earlier this year, and the first phase of the […]

Reforming India: just the beginning

By Kunal Desai, Neptune India Fund

As global investors continue to scour emerging markets through the lens of reform potential, India shines bright. Indeed, we think it can sparkle even brighter. We anticipate India’s self-imposed 10-year ‘policy holiday’ to turn into one of the most pro-growth and pro-investment policy calendars seen in Asia in years. The Indian electorate has engineered a historic verdict. We now have the strongest Indian government since 1984, with the pro-market Bharatiya Janata Party (BJP) achieving an absolute majority for the first time in the party’s history.


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