Dynamic Annual Rate Dar Mortgage Comparisons Made Easier

Dynamic Annual Rate Dar Mortgage Comparisons Made Easier



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 will differ in​ that it​ will take into account fees,​ charges,​ and arrangement fees .​
It will also be calculated over the​ length of​ time that the​ loan is​ likely to​ be kept .​
This is​ because many borrowers that take on​ Home loans and mortgages decide to​ pay off the​ loan in​ full after a​ few years - usually when a​ special offer such as​ a​ fixed rate runs out - and remortgage to​ a​ better value package .​
Experts state that the​ DAR calculation will make it​ easier for borrowers to​ calculate the​ accurate cost of​ a​ loan,​ and will enable them to​ benefit from far easier and more accurate comparisons on​ similar loan deals .​
This will enable them to​ determine if​ and when they can benefit from switching from one product to​ another,​ and will also allow them to​ see how interest rate changes will affect the​ various costs associated with Home loans and mortgages.
An official from the​ Council of​ Mortgage Lenders said that this new measure makes information for consumers more 'comprehensive' and 'meaningful',​ and that it​ could prove very useful for consumers that are not sure with regards to​ how long they will be keeping the​ home loan or​ mortgage on​ before paying it​ off.




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