Consumer Credit Act 1995

Criteria for calculation of APR in relation to housing loans.


122.(1) For the purpose of calculating the APR in relation to a housing loan the total cost of credit to the borrower shall be determined with the exception of the following charges—

(a) charges other than the purchase price which the consumer is obliged to pay whether the transaction is paid for in cash or by credit including Government duties or taxes on the purchase or acquisition of the property, and fees payable by the borrower to his own agent for the carrying out of legal and other procedures associated with the acquisition of the property,

(b) charges payable by the borrower for non-compliance with any of his commitments laid down in the credit agreement,

(c) charges for insurance on the life of the borrower or for insurance against property damage which are designed to ensure payment to the creditor of credit outstanding in the event of the death of the borrower, or insurable damage to the property the subject of the credit agreement, before termination of the agreement.

(2) In calculating the APR in relation to a housing loan, the following assumptions shall be made:

(a) the creditor and the prospective borrower fulfil their obligations under the terms of the contract,

(b) in the case of credit agreements providing for variations in the rate of interest or other charges which are unquantifiable at the time of calculation, the APR shall be calculated on the assumption that the future rates of interest or charges are the current variable rates which will remain fixed and will apply until the end of the credit agreement. In circumstances in which the initial or subsequent interest rate is fixed for a specific period or periods, the calculation shall assume that the fixed rate or rates shall apply only for the period or periods specified and that the rates applicable to other periods of the contract are the current variable rates which will remain fixed for those periods,

(c) that the borrower is not entitled to any income tax relief or any other benefit not granted by the creditor under, or relating to, the transaction,

(d) where charges are payable at an unspecified date after the agreement is signed it shall be assumed that they are payable at the beginning of the agreement,

(e) in the case of advertising, the calculation shall be based on a typical example.

(3) A mortgage lender shall comply with the requirements of this section in relation to the calculation of the APR in respect of a housing loan.