A rise in mortgage-related misselling claims is set to send PI premiums soaring for mortgage brokers, according to PI broker Collegiate.
Head of claims Martin Archer believes rising interest rates and higher unemployment will mean a number of borrowers feel over-committed on their mortgages and may go to the ombudsman.
Archer says until now affordability has only been lim-ited by what the provider will lend but, with statutory regulation, mortgage brokers will consider it their jobs to advise on affordability despite confusion over the level it should be set at.
If the FOS decides that only loans of 3.5 times income are appropriate, then a tidal wave of claims could ensue.
Archer says: “The reason IFA premiums are very high is that not many underwriters are happy to dabble in high-risk business.
“If mortgage brokers are perceived as equally high-risk, then insurers will not want to take the risk.”