How APRC differs from the interest rate
The interest rate is the price of borrowing the money. It determines how much interest is added to the balance each month.
APRC takes that interest and adds the charges the lender knows about and includes in the total cost of credit, such as an arrangement or product fee, then spreads the whole cost across the full term using prescribed assumptions. The result is a single yearly percentage.1
Because fees are included, the APRC is normally higher than the interest rate. A loan with a low rate and high fees can have a higher APRC than a loan with a slightly higher rate and no fees.
What the calculation includes
| Included in APRC | Usually not included |
|---|---|
| Interest over the whole term | Early repayment charges |
| Arrangement, product or booking fees the lender includes | Fees for optional services you may never use |
| Valuation and other charges the lender knows the amount of | Costs whose amount the lender cannot know in advance |
| The assumption that the rate stays as illustrated | Future changes to a variable rate |
Ask the lender or broker which fees have been counted. If a broker fee is paid separately to the broker rather than to the lender, check whether it appears in the illustration.
Why a variable rate changes the picture
APRC is calculated as if the rate illustrated applies for the whole term. For a variable rate, or a fixed rate that later reverts to a variable rate, the figure assumes the current variable rate continues.1
Where a rate can change, the illustration also shows what the payments could look like if the rate rose. Read that section with the same care as the APRC. Our guide to fixed and variable rates explains the difference in more detail.
Using APRC to compare offers
APRC works best when the offers are alike. Compare loans of the same amount over the same term, and check that each illustration treats fees in the same way, whether paid separately or added to the borrowing.
- Match the amount available to you after any deductions.
- Match the repayment term where possible.
- Compare the APRC, the total amount repayable and the monthly payment together.
- Check separately for early repayment charges and how long they last.
A shorter term with a higher monthly payment can carry a lower total cost than a longer term with a lower APRC. The total amount repayable is the figure that shows this.2
What APRC does not tell you
It does not show whether the repayments are affordable for your household, whether a lender will accept your application or how the cost would change if you repaid early. It also says nothing about the suitability of securing the borrowing against your home.
For those questions, look at the illustration as a whole, ask the broker to explain the recommendation and read the guides linked below.
For loans secured against your home. Introduction to Loans Warehouse. Subject to status and lender criteria. Broker and lender fees may apply.
Your home may be repossessed if you do not keep up repayments on a mortgage or any other debt secured on it.
References
Sources checked on 17 September 2026. This guide describes how APRC is used in regulated mortgage documentation. No rate, fee or APRC is quoted as a Habitat Loans or lender figure.
- FCA: APRC calculations. Relevant charges and prescribed assumptions in the APRC.
- MoneyHelper: Mortgage advice and illustrations. Reading the personalised illustration and comparing costs.