Home buyers to get fairer picture of mortgage costs
Saturday 27 November 1999
Stephen Byers, Secretary of State for Trade and Industry (DTI), said the regulations "will put an end to misleading advertising practices".
The reforms implement an EC directive and come in three parts. First, APRs must reflect the total cost of a low-start mortgage over its entire life. For instance, under existing rules a 25-year mortgage with an introductory rate of 4.8 per cent for the first two years only could be advertised as 4.8 per cent APR. This is despite the fact that after two years the rate will switch to the lenders' standard rate (currently 7.2 per cent). Under the new rules the mortgage lender must make it clear that the APR will be 6.9 per cent over the entire period of the loan.
Second, the cost of compulsory payment protection insurance, which is required for most endowment mortgages, must be included in the interest rate calculation. The lack of such a rule has made endowment mortgages seem more attractive.
Third, a standard method of working out the APR must be used by all lenders. Under existing rules, an APR of 9.99 per cent could be expressed as 9.9 per cent. The new rules mean this has to be expressed as 10 per cent. The rules will be implemented from the start of 2000. They were welcomed by both lenders and consumer groups.
Sophie Gumple of the Consumers' Association said: "It's good that this long-running problem is being sorted out. From now on the APR will reflect the total cost of a low-start mortgage loan over its entire life. There will be less confusion in an already confused market."
Michael Coogan, director general of the Council of Mortgage Lenders, said: "This is a helpful move by the DTI to put right the problems that the previous APR regulations have perpetuated for so long."
The Treasury is also expected to announce before Christmas new legislation that will force lenders to scrap their existing voluntary mortgage code in favour of a statutory rulebook run by the Financial Services Authority, the financial regulator.
This would introduce, among other things, an ombudsman scheme for people who take out mortgages of below pounds 25,000.
- 1 Snoop Dogg and Jared Leto buy a stake in Reddit as A-list invests $50m
- 2 HeForShe campaign: Iceland to follow up Emma Watson speech with UN women's rights conference – for men only
- 3 Car tax disc changes: Two days to go - and they affect you much more than just not displaying a piece of paper
- 4 Ed Sheeran dedicates song to David Cameron
- 5 Now we know whose fault it is if you end up being murdered in Thailand
Snoop Dogg and Jared Leto buy a stake in Reddit as A-list invests $50m
Five-year-old Iris Grace is raising awareness of autism through her extraordinary paintings
Car tax disc changes: Five facts you never knew about your (almost obsolete) tax disc
The Aral Sea: Nasa pictures show how what was once the fourth largest lake in the world has become almost completely dry
Thailand beach murders: Hannah Witheridge 'was raped by two men before being killed'
Isis, we are told, is a 'clear and dangerous threat to our way of life'. I’m sorry, but I just don’t buy it
Exclusive: 'Putin's Russia has been my biggest regret,' says Nato's outgoing Secretary General
The Osborne Ultimatum: Chancellor’s benefits freeze bombshell will affect ten million households
There’s no excuse for Dave Lee Travis’s behaviour, but we need to keep a sense of proportion
Should gay sex be illegal? 16% of Britons think so
Mark Reckless becomes second Tory MP to defect to Ukip in a month
- < Previous
- Next >
iJobs Money & Business
£18000 - £23000 per annum + Commission: SThree: Real Staffing are currently lo...
NEGOTIABLE: Austen Lloyd: TRUST ACCOUNTANT - KENTIf you are a Chartered Accou...
£18000 - £20000 per annum + OTE £30000: SThree: SThree are a global FTSE 250 b...
Highly Competitive Salary: Austen Lloyd: CITY - Law Costs Draftsperson - NICHE...