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Railway society says borrowers still baffled by real cost of loans

Many borrowers are left confused about the true cost of a mortgage when shopping around for the best deal, according to Stafford Railway Building Society.

Manager George Robson says borrowers are often bombarded with information on interest rates, discount deals and cashback offers but still have little idea of how much a mortgage will cost them, despite strict rules on how interest rates are advertised.

Robson believes a loan&#39s annual payment rate – not its headline rate – should be used as the yardstick to compare deals between lenders.

He says the APR takes into account the extra charges often added to a mortgage, such as admin fees, set-up fees and redemption penalties. When these charges are added up, Robson says the APR is often far higher than the headline rate.

He says: “It is the APR that should be used to compare rates between lenders because it reflects the true cost of borrowing the money.

“People need to ensure they are aware of the charges that may be attached to a mortgage and perhaps look to secure cheaper monthly repayments by switching mortgage provider.”

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