/24-7PressRelease/ - LONDON, UK, October 17, 2007 - The council of Mortgage Lenders has proposed a new measure for defining the true cost of borrowing. The new measure - Dynamic Annual Rate or DAR - is an alternative to the current APR system. When it comes to presenting the true cost of secured loans and mortgages, DAR scores over the existing APR system.
The existing APR system is based on the assumption that loans would be held until maturity. But, the majority of loans and mortgages are repaid prior to maturity. This makes APR not relevant to many customers. The DAR is a refinement in this aspect. It is calculated with reference to a period of time for which the loan may be kept. The new measure is under consideration for the time being.
Michael Coogan, Director-general of CML said: "The Dynamic Annual Rate provides a useful basis for discussion on the ways mortgage lenders can make consumer information as comprehensive, accessible and meaningful as possible."
Coogan further said that: "The DAR itself does not provide all the answers, but it is a useful measure for consumers who are uncertain about how long they will hold their mortgages, and the intermediaries who advise them."
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