Hamptons International Mortgages has called for APRs on mortgage products to be scrapped.
It argues that the trend of remortgaging has made the APR redundant because the movement of standard variable rates over two decades is impossible to predict, meaning that the calculation of an APR is flawed.
It also believes that as remortgaging increases, the time a customer spends on the SVR decreases dramatically, again rendering the APR calculation inaccurate. Borrowers often have no idea what the APR actually is, the broker adds.
Hamptons also claims the launch of retention strategies may lead to a drop in remortgaging between lenders and strike yet another nail in the coffin of APRs.
Hamptons International Mortgages technical director Jonathan Cornell says: The APR is the great white elephant of the mortgage market. It is a pointless indicator, based on the highly unrealistic scenario of a client finishing their rate and being too stupid or too lazy to switch products for a better rate, even with their existing lender, and spending the remaining 23 years or so on a standard variable rate which remains the same.
Even lenders, who have traditionally relied on customer complacency to boost their bottom lines, will soon wake up to the fact that they need to start offering existing customers reasons to stay as well as attracting new ones.
The new customer retention schemes from the Halifax is a welcome development for the industry, for lenders who will maintain clients, customers who will benefit from more competitive rates and brokers who now no longer need to continually churn to earn.
Im baffled as to why APRs have lasted as long as they have, as I cannot think of anyone within the industry who feels they are a good measure of value.