Dynamic Annual Rate – DAR – Mortgage Comparisons Made Easier
A proposed change in interest rate measures in the UK could make it far easier for consumers to compare the cost of mortgages, with the new interest rate measure offering increased transparency on the cost of borrowing. The Council of Mortgage Lenders claims that the new interest rate measure, which is known as the DAR or the Dynamic Annual Rate, will make the cost of borrowing far clearer to consumers, thus making it simpler for borrowers to compare loans in order to find the most competitive deal.
Currently, lenders in the UK use the Annual Percentage Rate measure, also known as the APR, in order to calculate the cost of borrowing. When using the APR to calculate the cost of borrowing the lender calculates on the basis that the loan will be kept on over the full term, ie 25 years. However, with many people switching mortgages before the end of the 25years, the APR does not offer a true comparison. Also, when using the APR measure no fees, charges, or arrangement fees are taken into account – the APR is based solely on the actual amount borrowed.
The DAR interest rate measure...
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