When comparing mortgages, you will see a figure called the APRC, meant to help you compare deals, but it has real limitations. This guide explains what APRC is and how to compare mortgages properly: what the figure shows, why it can mislead, and the better way to find the cheapest deal for you.
What APRC is
APRC stands for annual percentage rate of charge. It is a figure lenders must show that represents the overall cost of a mortgage as a yearly rate, including the interest and most fees, calculated over the entire mortgage term. It is designed to let you compare the total cost of different mortgages on a like-for-like basis, in a single percentage, rather than just the headline rate.
How it is meant to help
The idea behind APRC is to capture the full cost, rate plus fees, in one number, so a deal with a low rate but high fees can be compared fairly against one with a higher rate and no fees. In theory, comparing APRCs lets you see which mortgage costs more overall, rather than being misled by an attractive headline rate that hides large fees.
Why it can mislead
In practice, APRC has a major limitation: it assumes you keep the mortgage for its entire term and stay on the lender's standard variable rate after the initial deal ends. Since most people remortgage when their deal ends rather than staying on the standard variable rate, the APRC reflects a scenario that rarely happens, as our guide to the standard variable rate explains. This makes it a poor guide for most borrowers.
The better way to compare
A more useful approach is to compare the total cost over the initial deal period, the period you will actually be on the deal. Add up the interest you would pay during the fixed or other deal, plus the fees, for each option, as our guide to mortgage fees explains. The deal with the lowest total cost over that period is usually the best, given you will likely remortgage afterwards.
The rate and fee together
Because a low rate can come with a high fee and vice versa, comparing the rate and fee together over the deal period is essential. On a small mortgage, a large fee outweighs a slightly lower rate; on a large mortgage, the rate matters more. Working out the total cost for your loan size, as our guide to how long to fix notes, shows which deal is genuinely cheapest for you.
Comparing like for like
When comparing, make sure you are comparing like for like: the same deal length, the same loan-to-value band, and on the same repayment basis. Comparing a two-year fix against a five-year fix, or different loan-to-values, is not a fair comparison, as our guide to loan-to-value (LTV) explains. Lining up comparable deals ensures the cheapest one really is cheapest for your circumstances.
Using tools and advice
Mortgage comparison tools and brokers can work out the true cost of competing deals over the deal period, doing the maths for you and accounting for fees. Given how the APRC can mislead, this practical comparison is far more useful for choosing a deal. A broker can also factor in your circumstances and find deals you might not see, helping you choose the mortgage that genuinely costs you least.
Why the APRC assumption rarely holds
The APRC assumes you keep the same mortgage for its entire term, reverting to the standard variable rate after the deal ends. In reality, most people remortgage when their deal ends to avoid that rate, so the years of SVR the APRC assumes never happen. This makes the APRC reflect a scenario that rarely occurs, which is why it is a weak guide to the real cost most borrowers will face.
Comparing over the deal period
The practical alternative is to compare deals over the initial period you will actually be on them. For a two-year fix, work out the interest over two years plus the fees; do the same for each option. The deal with the lowest total cost over that period is usually best, since you will remortgage afterwards anyway, as our guide to the best time to remortgage explains.
A total-cost example
Imagine comparing two two-year fixes on a £200,000 mortgage. Deal A at 4.4% with a £999 fee, deal B at 4.5% with no fee. Calculate the interest over two years for each, add the fee, and compare. The cheaper total wins, regardless of which has the lower headline rate. This kind of comparison, over the real deal period, is far more reliable than relying on the APRC.
Do not forget incentives
When comparing total cost, include any incentives such as free valuations, free legals or cashback, which reduce the effective cost of a deal, as our guide to mortgage fees explains. A deal with a slightly higher rate but valuable incentives can beat a lower-rate deal once everything is counted. A full comparison weighs the rate, fees and incentives together over the deal period.
Beware the headline rate
The headline rate alone can be misleading, since a very low rate may come with a high fee, while a slightly higher rate may have none. Focusing only on the rate, or only on the APRC, can lead you to a more expensive deal. Looking at the whole picture, rate, fees and incentives over the deal period, is the reliable way to find the cheapest mortgage for your situation.
The role of a broker or calculator
A mortgage broker or a good comparison calculator can work out the true cost of competing deals over the deal period, accounting for the rate, fees and incentives, which is far more useful than relying on the APRC. Given how easily the headline rate or the APRC can mislead, this practical comparison helps you choose the genuinely cheapest deal, as our guide to how long to fix notes for length choices.
Why APRC still appears
The APRC is still shown because lenders are required to display it as a standard measure, intended to aid comparison. It is not useless, it captures the full-term cost in one figure, but its assumptions limit its usefulness for most borrowers. Understanding why it appears, and its limitations, lets you take it as one piece of information while relying mainly on the total cost over your actual deal period.
Take the APRC as a rough, standardised figure rather than the final word, and base your real decision on the total cost over the deal period for comparable deals, and you will choose far more reliably than by following the headline rate or the APRC by itself.
In short
APRC is the annual percentage rate of charge, a single figure for a mortgage's total cost over its whole term, including fees. But because it assumes you stay the full term and revert to the standard variable rate, which most people do not, it can mislead. A better approach is to compare the total cost, rate plus fees, over the initial deal period, comparing like for like, ideally with a tool or broker.
Where to get help and next steps
Read our guides to mortgage fees, fixed versus variable, loan-to-value, and how long to fix. This is general information, not mortgage or financial advice.