ANNEX I

Path:
Mortgage Credit Directive (MCD) > ANNEX I
Title:
ANNEX I
Description:
CALCULATION OF THE ANNUAL PERCENTAGE RATE OF CHARGE (APRC)
Main content:

I.  Basic equation expressing the equivalence of drawdowns on the one hand and repayments and charges on the other. The basic equation, which establishes the annual    percentage rate of charge (APRC), equates, on an annual basis, the total present value of drawdowns on the one hand and the total present value of repayments and payments of charges on the other hand, i.e.

image

where:

X         is the APRC

m        is the number of the last drawdown

k          is the number of a drawdown, thus 1 ≤ k ≤ m

ck        is the amount of drawdown k

tk         is the interval, expressed in years and fractions of a year, between the date of the first drawdown and the date of each subsequent drawdown, thus t1 = 0

m'        is the number of the last repayment or payment of charges

I        is the number of the last repayment or payment of charges

DI        is the number of the last repayment or payment of charges

sI        is the interval, expressed in years and fractions of a year, between the date of the first drawdown and the date of each repayment or payment of charges.

Remarks:

  1. The amounts paid by both parties at different times shall not necessarily be equal and shall not necessarily be paid at equal intervals.
  2. The starting date shall be that of the first drawdown.
  3. Intervals between dates used in the calculations shall be expressed in years or in fractions of a year. A year is presumed to have 365 days (or 366 days for leap years), 52 weeks or 12 equal months. An equal month is presumed to have 30,41666 days (i.e. 365/12) regardless of whether or not it is a leap year.
    1. every day shall be counted, including weekends and holidays;
    2. equal periods and then days shall be counted backwards to the date of the initial drawdown;
    3. the length of the period of days shall be obtained excluding the first day and including the last day and shall be expressed in years by dividing this period by the number of days (365 or 366 days) of the complete year counted backwards from the last day to the same day of the previous year.
  4. The result of the calculation shall be expressed with an accuracy of at least one decimal place. If the figure at the following decimal place is greater than or equal to 5, the figure at the preceding decimal place shall be increased by one.
  5. The equation can be rewritten using a single sum and the concept of flows (Ak), which will be positive or negative, in other words either paid or received during periods 1 to n, expressed in years, i.e.:

image

    S being the present balance of flows. If the aim is to maintain the equivalence of flows, the value will be zero.

II. Additional assumptions for the calculation of the APRC

(h) Where the date or amount of a payment to be made by the consumer cannot be ascertained on the basis of the credit agreement or the assumptions set out in points (g), (i), (j), (k), (l) and (m) it shall be assumed that the payment is made in accordance with the dates and conditions required by the creditor and, when these are unknown:

(k) In the case of an open ended credit agreement, other than an overdraft facility and bridging loan, it shall be assumed that:

For the purposes of this point, an open-ended credit agreement is a credit agreement without fixed duration and includes credits which must be repaid in full within or after a period but, once repaid, become available to be drawn down again.