Now that’s a good thing where the calculation makes sense, but on mortgage products in its current guise it makes no sense at all.

A simple look at the best buy tables on our website will show you that a product far cheaper during its initial interest rate term may have a much higher APR than a product with a considerably higher rate of interest. The issue is that APR is calculated over the lifetime of the loan and so will also consider the reversion rate of the product after its initial term.

There are several reasons why this is misleading;

1. 1. Reversion rates are generally variable and not linked directly to bank base rate. In two years time a lender with a previously un-competitive reversion rate may well be leading the market and vice versa – hence it is not a factor that should play a major part in the decision making process.
2. 2. You would generally regularly remortgage during the early years of your mortgage repayment to ensure a competitive rate of interest so including the reversion rate after the initial mortgage term distorts the picture.
3. 3. Clever design can skew the figure. Lifetime trackers appear very competitive because they have no reversion rate, and refunding upfront fee’s affects the calculation but could cost a pretty penny if the loan never goes ahead.

APR is a system that was never really designed for mortgage contracts but has become a legal obligation when advertising them due to the confused dual regulatory system between the FSA and the Office of Fair Trading, it makes some sense on unsecured loans and very little in the mortgage market.

It is high time this dual regulation was removed and APR calculations either scrapped on mortgage contracts or replaced with something far more specific to the complex nature a mortgage product.

In conjunction with massive falls in the London Interbank Offered rate recently, and small falls in Swap rates the stage looks set for continued reduction in mortgage interest rates over the coming months.

HSBC’s and Lloyd’s Group announced large rate cuts in the lower loan to value range last week and over the past few days several lenders have announced small changes to rates and criteria higher up the loan to value range.

While there has been little change in higher loan to value rates in the 80% and upwards category there is a feeling among the mortgage advice community that things will now start to ease in this category too perhaps for remortgages in the first instance but potentially for new purchase as well.

Whilst it’s unlikely we will see any products at 95% for new purchase soon things definitely appear to be moving in the right direction which can only be good news for homeowners and the economy at large.

There is however a nifty product currently being offered by Nationwide Building Society (one of the few lenders still touting for new business) which allows you to take one of their current tracker products now and switch it to a fixed rate whenever you choose without incurring early repayment charges.

Other providers have similar offerings however there is a difference which sets them apart. The Nationwide will allow you to switch to a fixed rate based on the Loan to Value of the valuation taken when you arrange your tracker, which means that if value’s continue to fall you will not be locked out of new deals.

You will have to pay a second arrangement fee however and you will be restricted to the fixed rates available when you decide to change which could be higher than those available now but if you aren’t sure which way to turn at least this offers a get out clause which normal tracker products will not.