Friday 21st September 2007
The Council of Mortgage Lenders (CML) has proposed a new headline rate for interest payments in order to help consumers compare loans more easily.
As many Britons settle their loans ahead of the actual repayment schedule, the council argues that interest rates should be calculated based on the likely length of time taken to clear the debt.
Calling such a calculation the Dynamic Annual Rate (DAR), the CML adds that all charges incurred during the time the loan is held should be included in the sums.
"The DAR provides a useful basis for discussion on the ways mortgage lenders can make consumer information as comprehensive, accessible and meaningful as possible," explains director general Michael Coogan.
But he notes that the Annual Percentage Rate commonly quoted is not wrong as "it is a statutory requirement for lenders to use it".
New figures from the CML show lending fell by six per cent over the month in August and by three per cent year-on-year.
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