Interest Rate v APR

Officer Giggles

I'm sure this is probably an easy one for someone to explain but what exactly makes up the APR and why does the difference between the interest rate and APR vary so much.

For example

AIB 3 year fixed mortgage is 3.2%, APR 3.22%
PTSB 3 year fixed mortgage is 2.95%, APR 3.64%

If my understanding is right, despite AIB having the higher interest rate a person would be better off going with them as their APR is lower. How have AIB nearly identical rates and PTSB differ by .69.

Also if putting the rates into a calculator to work out repayments, are you using the interest rate or the APR.

Thanks

368100

Apr takes compounding into the calculation and should include any fees or addition charges that are payable (would exclude arrears charges)

Its purpose is to allow a consumer to compare real cost across providers on a like for like basis. APR can differ based on drawdown and monthly repayment dates, there should be an indicative example shown with how they calculated the Apr advertised.

You use the interest rate in calculator as Apr is only to give an easily comparable real cost of credit.

Officer Giggles

368100 wrote: »

Apr takes compounding into the calculation and should include any fees or addition charges that are payable (would exclude arrears charges)

Its purpose is to allow a consumer to compare real cost across providers on a like for like basis. APR can differ based on drawdown and monthly repayment dates, there should be an indicative example shown with how they calculated the Apr advertised.

You use the interest rate in calculator as Apr is only to give an easily comparable real cost of credit.

To use my example of the two 3 year fixed rates, do you go with AIB because the Apr is cheaper or ptsb because the interest rate is cheaper

368100

Officer Giggles wrote: »

To use my example of the two 3 year fixed rates, do you go with AIB because the Apr is cheaper or ptsb because the interest rate is cheaper

My initial though would be AIB but i'd need to see why theres such a difference in the Apr.. fees or frequency of interest capitalisation likely to explain it....can you post the two indicative examples that they should have advertised along with the Apr.

Officer Giggles

I can't see any examples on the site, the page just lists all the rates, I do see on the PTSB site
"Annual Percentage Rate of Charge (APRC) is calculated for existing business fixed rates using the Standard Variable Rate (SVR) as the applicable rate following the fixed rate period"
The PTSB variable rates are way higher than those in AIB so I'd say that could be the reason

coylemj

Officer Giggles wrote: »

To use my example of the two 3 year fixed rates, do you go with AIB because the Apr is cheaper or ptsb because the interest rate is cheaper

You ask both of them for quotes and go with the one that's cheaper.

For the same term (3 years) and with the rate fixed for the term, there's no point in trying to reverse-engineer their maths, just go with the lower quote.

368100

Officer Giggles wrote: »

I can't see any examples on the site, the page just lists all the rates, I do see on the PTSB site
"Annual Percentage Rate of Charge (APRC) is calculated for existing business fixed rates using the Standard Variable Rate (SVR) as the applicable rate following the fixed rate period"
The PTSB variable rates are way higher than those in AIB so I'd say that could be the reason

They really should be showing an Apr against the fixed rate though. Can you post the links of the two pages and ill have A look?

Officer Giggles

PTSB
https://www.permanenttsb.ie/mortgages/mortgage

AIB
https://aib.ie/our-products/mortgages/mortgage-interest-rates

wotzgoingon

That AIB link above does not work 404.

Officer Giggles

https://aib.ie/our-products/mortgages/mortgage-interest-rates

Officer Giggles

Tried to edit the original post but the hyperlink won't show up

368100

They're both based on 100k over 20 years. Apr calculation is assuming they revert to standard variable rate after the fixed term and given Ptsb variable rate is 4.5% vs aib 2.95% this explains ptsb higher Apr.

If it were me id go with ptsb as cost per €1000 is €5.52 vs AIB €5.64.....you'd just need to be aware that currently their SVR is very expensive so after the 3 years you'd probably need to re-fix if it suited you or switch to another lender.

Officer Giggles

368100 wrote: »

They're both based on 100k over 20 years. Apr calculation is assuming they revert to standard variable rate after the fixed term and given Ptsb variable rate is 4.5% vs aib 2.95% this explains ptsb higher Apr.

If it were me id go with ptsb as cost per €1000 is €5.52 vs AIB €5.64.....you'd just need to be aware that currently their SVR is very expensive so after the 3 years you'd probably need to re-fix if it suited you or switch to another lender.

Cheers