Lenders have hit out at proposals in the European mortgage directive that will force lenders to provide an extra APR outlining the worst case scenario for borrowers.
Under the proposals, every variable mortgage or fixed-rate deal under five years will need to include an APR that shows how the mortgage could have been affected based on interest rates
over the previous five years. The aim is to make consumers better aware of the risks associated from interest rate fluctuations.
The Financial Conduct Authority is expected to consult on the details of the change when the directive comes into force.
The directive is set to be agreed by the EU in September when the UK will have two years to translate it into British law and regulations.
Building Societies Association senior policy adviser Sharon Chapman says: “We have always been in favour of pre-contractual disclosure, but too much information can often be as bad as too little. Two APRs is likely to be more misleading to consumers than helpful.”
Lender trade body the European Mortgage Federation senior policy director Jennifer Johnson says: “Already a lot of consumers have problems understanding what an APR is so if you are providing two of them it doubles the risk of confusion. We are not sure it adds any value as it is more overload for the consumer and more hassle for lenders.”
Your Mortgage Decisions director Dominik Lipnicki says: “To add another APR on top of an APR that is already useless to most clients is mad. We need more localised regulation and not an EU-wide APR initiative.”