That's what the 'A' in APR means. It's pretty clear.
If I take out a £100000 loan with an APR of 2% and pay it back in full at the end of the first year, then the total amount I pay back is £102000. Apart from any early repayment charges, the original total term is irrelevant.
When taking out such a large sum, over such a duration for buying your home, the total amount to repay is not the important aspect. It's not like taking out a loan to buy a car or a holiday. You don't have the option of choosing between buying now with a loan, or saving up for a few more months or years to buy without one.
Affordability of the regular repayments over the duration of the loan is the key thing.
There is absolutely no way I would take out a loan of that size with fixed interest in the way you describe. It would be far too expensive, and give the bank too much power.
I'm relying on the fact that I can make large overpayments in order to own my home outright halfway through the original term. That couldn't happen without an annual interest rate. In fact, the most logical thing to do in that situation is to stretch the loan out for as long as possible, so that inflation makes your repayments cheaper.
For a rough example -
Imagine you bought a house for £100K 5 years ago, the interest is such that over 20 years it will cost £150K total (e.g. 3.5% over 25 years).
You have probably paid about 30K, taking about £15K off the capital.
You sell the house for the same amount you bought it. With annual interest, you owe the bank £85K, you give them that, and use the spare 15K for your next home.
With a fixed price, you still owe the bank £120K. You give them the £100K you got from selling the house, and you somehow have to find £20K to pay them the rest.
If I take out a £100000 loan with an APR of 2% and pay it back in full at the end of the first year, then the total amount I pay back is £102000. Apart from any early repayment charges, the original total term is irrelevant.
When taking out such a large sum, over such a duration for buying your home, the total amount to repay is not the important aspect. It's not like taking out a loan to buy a car or a holiday. You don't have the option of choosing between buying now with a loan, or saving up for a few more months or years to buy without one.
Affordability of the regular repayments over the duration of the loan is the key thing.
There is absolutely no way I would take out a loan of that size with fixed interest in the way you describe. It would be far too expensive, and give the bank too much power.
I'm relying on the fact that I can make large overpayments in order to own my home outright halfway through the original term. That couldn't happen without an annual interest rate. In fact, the most logical thing to do in that situation is to stretch the loan out for as long as possible, so that inflation makes your repayments cheaper.
For a rough example -
Imagine you bought a house for £100K 5 years ago, the interest is such that over 20 years it will cost £150K total (e.g. 3.5% over 25 years).
You have probably paid about 30K, taking about £15K off the capital.
You sell the house for the same amount you bought it. With annual interest, you owe the bank £85K, you give them that, and use the spare 15K for your next home.
With a fixed price, you still owe the bank £120K. You give them the £100K you got from selling the house, and you somehow have to find £20K to pay them the rest.