What Is APRC?

What is APRC in Mortgage Rates

When choosing a mortgage rate for remortgage or purchase it is very important to know the rates mention on the key feature illustration.

APRC refers to the annual percentage rate. As the name suggests, it is the rate of interest a lender charges for their loan on an annual basis. This interest is often associated with financial instruments like credit cards, loans, mortgages, etc. It lets the borrowers know how much interest they will be charged for the amount borrowed annually.

In the case of a mortgage, you can use the APRC to calculate the final amount you will be paying your mortgage lender at the end of the term. It also helps you calculate the monthly interest charged on your borrowings. Different loans and mortgages come with different APRCs. Also, different lenders may charge different interest rates for their services.

APRC was introduced in 2016 by the Financial Conduct Authority (FCA) to give borrowers a more realistic view of how much a deal would cost them over a specific period.

So, how does APRC work?

How does APRC work?

APRC is represented as a percentage of interest charged by a lender to a borrower on an annual basis. It is often an incorporation of all charges associated with the concerned loan, such as fees and other expenses to be incurred before or during the tenure. Lenders calculate APRC as if the borrowers will keep the entire loan amount with themselves for the entire term.

If you are planning to take a mortgage to purchase a property, different APRCs help you compare different deals and lenders before you finalize the best alternative. Make sure you take help from a mortgage broker to help you analyse the different APRCs in the market. If you are planning to switch to a better mortgage deal, you can work with a trusted and experienced remortgage broker for a thorough analysis.

A lot of mortgage deals offer an initial fixed interest rate that changes into a variable-rate mortgage after the term ends. Borrowers often get swayed by this introductory interest rate while finalizing a mortgage deal. APRC considers these fluctuations throughout the year and gives you a holistic estimate of the interest you will be charged for the concerned year. Having a complete picture helps you make better decisions.

How to calculate the APRC of a mortgage?

To calculate the APRC, you need to take the introductory interest rate of a mortgage deal along with the long-term interest rate with all possible changes in between. This will give you a percentage showing the interest you will be charged at the end of the year if you keep the entire sum with you. If everything remains the same, it will show you the amount you are liable to pay every year until you clear all your dues.

APRC calculation involves factors that are unique to your case, such as your loan term, loan amount, property value, and credit history. Your lender will analyse these factors during the initial stage while checking your affordability and the total cost of your loan.

What is the difference between APRC and APR?

While APRC stands for annual percentage rate charge, APR simply refers to the annual percentage rate. It is common for people to get confused between the two terms and use them interchangeably. While the essence of both rates is similar, there is a subtle difference between the two.

While APR only shows you the interest rate levied to you for one year, APRC gives you the total amount you are liable to pay until you clear all your dues.

Which rate is more important?

Initial rate shown on KFI while applying for remortgage or purchase is for the specific term, let’s say 2 years or 5 years fixed. After that term ends, your mortgage will change to higher rate known as standard variable rate.

While APRC shows the total mortgage term interest rate but most of the borrowers will remortgage at the end of the fixed term of the mortgage to save on higher interest rate.

For most borrower’s initial rate is the most important rate than APRC as they will explore the options to remortgage. It is always advisable to work with fee free mortgage broker as they have depth knowledge which will helps to make inform decision.