SHM July 13, 2005 The comparison rate, or true rate, a consumer tool for comparing the cost of loans, is under review after just a few years. Special interest groups are pushing hard to have the legislation either changed or abolished, depending on their stake in the mortgage industry.
Andrew Willink, says: “We developed an ‘annual average
percentage rate’ [AAPR] model so that we could tell who was offering the best mortgage, with the cheapest interest rate, taking into account all the fees and charges. But once the state governments legislated and made a ‘comparison rate’ mandatory, people started to misbehave.”
Willink’s point is that some lenders have put some fees and charges outside the comparison rate, to make their loans look cheaper than competitors’ loans. For consumers, comparing the true cost of a loan has become difficult once more.