Housing economist John Wriglesworth has warned that brokers could face future misselling claims if they advise clients to take out two-year fixed-rate products in the current market climate.
Speaking at the Mortgage Business Expo 2007 in Manchester last week, the Wriglesworth Consultancy managing director said he believes there is a significant risk that interest rates could rise by as much as 2 per cent in the next two years, storing up problems for borrowers who take out a fix now.
He said: “If brokers sell clients two-year fixed rates now, they could find themselves moving on to a 8 or 9 per cent standard variable rate. This is misselling and I appeal to all brokers to stop this.”
He noted that borrowers could find themselves unable to remortgage, resulting in defaults, following what has happened in the US housing market. “If repossessions start to happen, the media will turn on brokers and place the blame on you,” he said.
John Charcol senior technical director Ray Boulger says: “I do not follow this logic. For this to happen, we would have to see property prices falling and lenders not offering retention rates. My view is that interest rates are close to a peak. Therefore, it is a good idea to take a two-year fix or a tracker rate.”