APR Explained

An explanation to identify the true cost of borrowing and a standard in order to provide a method of comparing costs of different loans. Initially mortgage lenders were not obliged to quote an APR due to its inappropriateness in comparing mortgage loans. APR was designed to reflect the cost of different types of hire-purchase contracts that were quoted on flat and fixed basis giving headline rates which were often half the APR. It is a legal requirement that a true APR figure be provided with any loan.

As the FSA (Financial Services Authority) have increasingly regulated the mortgage market more stringent rules have been put in place with regards to quting ARP's. For example the size of the lettering in adverts should be appropriate and not lead to confusion.