Brussels to investigate mortgage APR figures
Your support helps us to tell the story
From reproductive rights to climate change to Big Tech, The Independent is on the ground when the story is developing. Whether it's investigating the financials of Elon Musk's pro-Trump PAC or producing our latest documentary, 'The A Word', which shines a light on the American women fighting for reproductive rights, we know how important it is to parse out the facts from the messaging.
At such a critical moment in US history, we need reporters on the ground. Your donation allows us to keep sending journalists to speak to both sides of the story.
The Independent is trusted by Americans across the entire political spectrum. And unlike many other quality news outlets, we choose not to lock Americans out of our reporting and analysis with paywalls. We believe quality journalism should be available to everyone, paid for by those who can afford it.
Your support makes all the difference.THE EUROPEAN Commission is to investigate the way the cost of mortgages is expressed to borrowers. Lenders suspect this could eventually force them to include the cost of compulsory insurance, writes Maria Scott.
An increasing number of mortgages are sold with tied-in endowment policies, household or redundancy protection insurance. Including these in mortgage interest calculations would show these deals in an unflattering light.
It is a move that would be welcomed by the consumer lobby and by the insurer Direct Line, which recently launched a campaign against the way building societies sell insurance with mortgages.
Jean Eaglesham, head of the money group at the Consumers' Association, said interest rates on mortgages would rise by between 1 and 3 per cent if insurance premiums were taken into account.
The Commission intends to look at how annual percentage rate calculations are used to express the cost of mortgages. APR figures aim to show the total cost of borrowing, adding extra charges to the nominal rate and taking into account the effect of compounding.
At the end of last year the Commission implemented its second directive on consumer credit, which introduced rules on the way lenders calculate APRs on consumer loans.
This requires compulsory insurance to be included, but does not apply to mortgages.
The Council of Mortgage Lenders has already told the commission it opposes a separate directive on mortgages.
Meanwhile, the British Government has delayed implementing the second directive on consumer credit, arguing that elements of the rules are misleading. But by the end of 1995 it will be compulsory for all member states.
Join our commenting forum
Join thought-provoking conversations, follow other Independent readers and see their replies
Comments