Nominal rate
The gross interest rate used to compute the loan's interest, excluding insurance, guarantee and ancillary fees. It is the figure highlighted in marketing but it does not reflect the true cost of credit. To compare two offers, the APRC is far more meaningful than the nominal rate alone.
Key points
- Used solely to compute the loan's interest; excludes insurance, fees, and guarantee costs.
- An incomplete indicator for comparing two offers; always supplement with the APRC.
- The nominal rate displayed by the bank may conceal high fees that inflate the APRC.
- Used as the calculation base in the amortization schedule and bank simulations.
Frequently asked questions
Why do banks highlight the nominal rate rather than the APRC?
The nominal rate is the lowest figure in the offer presentation and attracts prospects. Regulation requires disclosure of the APRC, but the latter is often relegated to a footnote. The broker trains clients to read the APRC first for an honest comparison.
How is the monthly installment calculated from the nominal rate?
The annual nominal rate is divided by 12 to get the monthly rate, which is applied to the outstanding capital using the constant-annuity formula. This mechanism is the same for all amortizing loans; what differentiates offers is the rate level and the ancillary costs not included in this calculation.
What is the difference between the nominal rate and the actuarial rate?
The nominal rate is a monthly proportional rate annualized by simple multiplication. The actuarial (or effective) rate accounts for interest compounding at each period, giving a slightly different result. For French mortgages, rates are generally expressed in actuarial form within the APRC.
In practice
Two offers display the same nominal rate of 3.50%; the first has arrangement fees of €500 and insurance at 0.20%/year, the second fees of €1,500 and insurance at 0.10%/year. The APRC of each differs meaningfully, the broker computes both to identify the genuinely cheaper offer.
Official sources
- The annual percentage rate (APRC) · Service-Public.gouv.fr
- Mortgage credit (official guide) · Service-Public.gouv.fr