In describing a housing loan, the term 'nominal rate' refers to:

• A. the APRC.
• B. any fees and charges applied to the loan.
• C. the gross level of repayment per €1,000 borrowed.
• D. the interest rate excluding all compulsory charges and the frequency at which interest is charged.

Answer: (D)

The sits and starts with the basic rate quoted for a housing loan, before any extra costs are added and before turning the rate into an effective cost via compounding. This is the rate you see as the base percentage and it excludes compulsory charges. It also implies how often interest is applied over a year (the compounding frequency), which will influence the actual cost you incur but is not itself the extra charges added on top.

So the nominal rate is simply the baseline interest rate, stated annually, with fees left out and with the understanding that the way interest is charged (how often it accrues) affects the true amount paid over time. The total cost of the loan, including fees, is captured by the APRC, which is why it is not the nominal rate. The other options describe either the fees, or the payment amount per euro borrowed, which are not the nominal rate.