What does APRC mean?

When you’re looking at mortgage offers, you’ll see lots of numbers and percentages. Among these is the APRC – a figure that often causes confusion.

It’s usually much higher than the interest rate that caught your eye in the first place, which can be puzzling. Understanding what APRC means helps you compare mortgage deals properly and avoid unexpected costs. This guide explains APRC in plain English, shows how it’s calculated, and helps you decide when it matters for your mortgage decisions.

What is APRC and why does it matter?

APRC stands for Annual Percentage Rate of Charge.

It’s a figure that shows the total cost of a mortgage over its entire term, expressed as a yearly percentage. Unlike the headline interest rate that might have attracted you to a particular mortgage deal, APRC includes all the mandatory costs of your mortgage:

• The interest rate (including changes after any initial fixed or discounted period)
• Arrangement fees
• Valuation fees
• Legal fees
• Any other charges you must pay

Since 2016, UK mortgage lenders must show the APRC on their advertisements and mortgage illustrations by law. This requirement came from EU regulations that remain in UK law after Brexit. The purpose is to help you compare different mortgage products on a fair, like-for-like basis.

Think of APRC as the “warts and all” figure that reveals what a mortgage really costs if you keep it for the whole term – often 25 to 35 years. While the headline rate might look attractive at 4.5%, an APRC of 6.7% tells a more complete story.

How APRC is calculated

The APRC calculation involves some assumptions that explain why it’s usually much higher than the initial interest rate.

Here’s what happens:

The calculation assumes you’ll keep your mortgage for the entire term – right through to the final payment. It factors in what happens after your initial deal ends (usually 2-5 years), when most mortgages switch to the lender’s Standard Variable Rate (SVR), which is almost always higher.

Let’s look at a simple example:

A £200,000 mortgage with a 2-year fixed rate of 4.5% and a £995 arrangement fee. After 2 years, it reverts to the lender’s SVR, currently 7.99%. The mortgage term is 25 years.

The headline rate is 4.5%, but the APRC might be around 7.2%. This big difference occurs because the calculation assumes you’ll pay the higher SVR for 23 years – far longer than the attractive fixed rate.

The APRC also assumes interest rates won’t change (it uses today’s SVR for future calculations) and that you’ll make all payments on time.

Common misconceptions about APRC

Many people misunderstand what APRC tells them.

Let’s clear up some confusion:

First, APRC isn’t the actual interest rate you’ll pay throughout your mortgage. It’s a representative figure for comparison purposes only. The real rates you pay will depend on interest rate changes and whether you remortgage.

Second, a lower APRC doesn’t always mean a better deal. If you plan to remortgage after the initial period (as most people do), the initial rate and fees might matter more than the APRC.

Third, APRC doesn’t predict future interest rate changes. It uses current rates in its calculations, which will almost certainly change over a 25-year mortgage.

Finally, don’t confuse APRC with APR. While similar, APRC is more comprehensive for mortgages and includes more costs.

When to focus on APRC (and when not to)

APRC is most useful in specific situations:

If you plan to keep your mortgage for its full term without remortgaging, APRC gives you the clearest picture of total costs. This might apply if you’re near retirement or taking a long-term fixed rate.

When comparing very different types of mortgages – like fixed versus variable, or high-fee versus low-fee products – APRC helps you see beyond the initial differences.

For example, a mortgage with a very low interest rate but high fees might actually cost more than one with a slightly higher rate but no fees. The APRC helps show this.

However, APRC becomes less relevant if:

You know you’ll remortgage after the initial period ends. In this case, focus more on the initial rate, fees, and any early repayment charges.

You’re a property investor with a short-term horizon. If you plan to sell within a few years, the initial costs matter more than the long-term APRC.

Most UK homeowners fall into the first category – around 77% remortgage after their initial deal ends, according to FCA data. For them, the APRC offers useful context but shouldn’t be the deciding factor.

How a mortgage broker can help with APRC

A mortgage broker can make sense of APRC figures in the context of your specific situation. They’ll explain how each mortgage offer would actually work for you, rather than relying on standardized calculations.

Brokers compare hundreds of mortgage products and understand the true costs beyond headline rates. They can quickly identify which deals offer genuine value based on your circumstances and future plans.

For example, a broker might show you that a mortgage with a higher APRC but lower initial rate makes more sense if you’re planning to move house in three years. Or they might find that a slightly higher initial rate with no fees offers better value than a fee-laden “discount” deal.

Brokers also have access to exclusive deals not available directly from lenders. These can sometimes offer better overall value, with competitive interest rates and fee structures that result in a lower APRC.

When discussing mortgages with a broker, ask:

• “Based on my plans to stay/move/remortgage in X years, which figure matters more – the initial rate or the APRC?”
• “How would the total cost change if I remortgaged after the initial period?”
• “What would happen to my costs if interest rates change significantly?”

Using APRC wisely when choosing a mortgage

APRC is one tool among many for making informed mortgage decisions. It offers a standardised way to compare different mortgage products, but its relevance depends on your personal circumstances and future plans.

When looking at mortgage offers, consider the APRC alongside the initial interest rate, fees, flexibility features, and how long you plan to keep the mortgage. The best deal isn’t always the one with the lowest headline rate or even the lowest APRC.

If you’re unsure which mortgage offers the best value for your situation, speaking with an independent mortgage broker can help. They’ll explain how different mortgages would work for your specific needs and help you find the right balance between short-term costs and long-term value.

Call or email us today to discuss your mortgage options and get clear, straightforward advice on finding the right deal for your circumstances.