Annual Percentage Rate of Charge (APRC) calculations

The Financial Conduct Authority, FCA, has published a Notice as regards the calculation of the Annual Percentage Rate of Charge (APRC) which must be identified and disclosed to clients before they commit to a mortgage with a qualified lender. Specifically, the FCA has become aware that some credit institutions and firms engaged in retail mortgage lending have published a wrong APRC due to technical difficulties in calculating the rate for loans that begin with a higher fixed rate and revert a lower rate thereafter during times of high market volatility.
In this context, the FCA reminds firms that MCOB 10A.3.1R(5) requires that institutions use the higher fixed rate at the beginning of the contract as if it would apply until the end of the contract to determine the annual rate. Institutions that have experienced technical troubles as noted above shall recalculate the APRC and take all (other) steps necessary to ensure to comply with this provision, including any possible disclosures of the correction of the APRC. The APRC is a significant value often used by borrowers when selecting a possible mortgage loan. It must be calculated on a consistent basis to ensure comparability among institutions and their loan offerings.