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Warnings wanted on discount mortgages

Brokers are calling for lenders to apply health warnings on mortgage deals that start low and then see rates rocket.

Research from Alliance & Leicester shows that 86 per cent of brokers think lenders should provide warnings.

FSA consumer research showed that 41 per cent of customers choose a mortgage on price but focus on initial payments rather than long-term affordability.

A&L head of intermediary mortgages Mehrdad Yousefi says: “Advisers and brokers are obliged under Mcob to provide advice and information on the consequences of taking out a low-start mortgage which rises sharply after a few years.

“Given that low start products were last really popular in the mid-to-late 1980s I don’t believe that this is a key issue in today’s market.”

Mortgage Intelligence managing director Sally Laker says: “I think extra warnings would help but it is not that everyone is doing a bad job on the advice process.”

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