Mortgage brokers slam Darling proposals
The mortgage industry has responded scathingly to newly appointed Chancellor Alistair Darling’s comments today on his concern that brokers and lenders are offering fixed-rate deals on only a short-term basis to maximise profits.
The Chancellor has said Labour will issue proposals shortly to boost the supply of long-term fixed-rate home loans for periods of up to 25 years, amid concerns that lenders are only offering short-term products so they can charge high arrangement fees.
John Charcol senior technical manager Ray Boulger says: “A lot of his comments seem like he hasn’t done his homework on the mortgage market. There are a lot of 10, 15 and 20 year products and three lenders are offering 25 years. But the reason why there’s only 3 lenders offering this is because there’s no demand.”
“Lenders are desperate to keep customers for longer term contracts. But the fact remains that a lender can’t afford not to be in the 2 year market as it has the most demand.”
Hamptons technical director Jonathan Cornell adds: “Whilst I am sure the new chancellor means well, I think he is flogging a dead horse. Professor Miles spent a long time investigating long term fixed rates and despite brave attempts from a couple of lenders very few long-term fixed rates were sold. I do not believe that the only reason why brokers sell short-term rates is to maintain their opportunity to remortgage clients in a couple of years.
“All long-term fixed rates have long-term early repayment charge periods and, as we know, our lives may change significantly over a 5, 10, 15, 20 and especially a 25 year period. In my experience these penalties discourage clients from taking out long term fixed rates.”
Promise Finance managing director Steve Walker is frustrated that the finger of blame has yet again been pointed at brokers. “To create a long term fixed product would undoubtedly result in higher rates as the lenders will need to factor in potential interest rate increases. So many borrowers will be worse off.”
Mortgage Advice Bureau head of lending Brian Murphy says although it is in theory an interesting concept as a solution to the issue of affordable housing, it fails to take into account the ever changing lifestyle of today’s society.
“When clients apply for a mortgage it is important to assess their circumstances at the present time and assess how these might change in the long term. Two year and three year fixed products are therefore popular due to their relatively short term restrictions. If 25-year fixes are to become the norm it is important that they offer sensible exit options should clients’ lifestyles and commitments changes.”