Brokers who recommend 2-year fixes are likely to be giving ‘poor advice’ due to the UK’s possible departure from the European Union in 2019.
That was the view of Rory Joseph, director of JLM Mortgage Services, and his colleague Sebastian Murphy, head of mortgage finance at JLM.
They urged brokers to take the EU into account and start making 3 and 5-year fixes the norm – which they argued is what customers want.
Joseph said: “This 2-year product ‘cash cow’ favoured by some of the larger firms is fast becoming poor advice, particularly when you timetable ahead and look at the environment clients will be dropped into in 2019.
“Who knows how the EU negotiations will unfold? Who knows how this might impact on the economy? Who knows what it will do to employment levels and, very importantly, interest rates?
“Advisers, and the networks that look after them, are in danger here of being far too short-termist by shovelling these two-year deals down clients’ necks when a 3-year-plus deal would be far wiser, and would ultimately give the client some breathing space and stability about their mortgage payments when the UK leaves the EU.”
JLM Mortgage Services is independent, nationwide and has 43 advisers across seven firms.
Murphy was pleased that lenders like Halifax have launched more 3-year products, while he is seeing more competitively-priced 4 and 5-year deals for existing borrowers with lower LTVs.
He said: “For those coming to their end of their deals now, those products represent compelling value and will take them through a potentially difficult period as the UK extricates itself from the EU.
“Unfortunately, there are still large numbers of advisers telling lenders that clients want 2-year deals when that is patently not the case.
“There needs to be some soul-searching from those who are pushing this fallacy because it’s poor advice in this market, especially when longer-term alternatives, where any extra cost for the client is minimal, are so readily available.
“That’s certainly not our approach as both advisers and a network that wants the best advice delivered to our clients.”
Joseph added: “There should be an adviser-led move towards 3-year-plus products because that would mean the client coming to the end of that deal towards the tail end of 2019/start of 2020 at the earliest.”