By Rachel Williams
MyNewDeal.com is set to make it easier for consumers and intermediaries to compare mortgages with the introduction of a ranking system previously unavailable outside banking and financial institutions.
Rather than using the Annual Percentage Rate (APR) as a comparison tool, the new mortgage portal site will allow borrowers to compare the cost of a mortgage using the Specific Term Adjusted Rate (STAR).
Already used by banks and lenders in assessing their funds, STAR can help consumers make more meaningful comparisons between mortgages. Marc Badrichani, chief executive officer at MyNewDeal.com said: “The problem at the moment is that APR compares mortgages over a 25-year term but the average life of a mortgage in the UK is seven years.”
As a result STAR can be set to illustrate the cost of a mortgage over the expected term of the mortgage, rather than its maximum term. STAR will also take into account the impact of other charges over the specified term. “STAR looks at payments, hidden costs, redemption penalties, upfront fees as well as cashbacks and other benefits,” said Badrichani.
By illustrating the real cost of a loan, Badrichani said STAR would help consumers see through the gloss of a lender’s advertising campaign by highlighting which products offer genuine value for money. “There are good products on the market and there are bad products and at the moment consumers do not have the tools to distinguish them,” he said
But the technology, which has been supplied by MyNewDeal’s principal shareholders, Credit Suisse First Boston, will not be confined to MyNewDeal users. MyNewDeal has already struck a deal with Bankhall, the IFA support services company making it available to 4,000 IFAs via its portal.
Tony Murrell, head of operations at Bankhall said: “This will be an additional facility for ranking mortgages alongside more traditional methods.”
STAR has already been backed by the Consumers’ Association and as criticism of APR continues, My New Deal believes STAR could, in time become the industry standard. Ian Wilson, head of UK operations at My NewDeal said: “I believe the Government is performing an ongoing review of APR and I would be surprised if STAR was not considered as a viable alternative.”
But Wilson said that while there were no immediate plans to make it available to other intermediaries, the technology will inevitably be adopted by the intermediary channel. “We can see a day when STAR will be available to all intermediaries – we do not have any plans to restrict it, there is little point in hiding technology.”