AMI concerned about short-termist market

Ryan Bembridge

April 6, 2016

Lenders are stoking short-termism by repeatedly slashing 2-year fixed rate remortgages, members of the Association of Mortgage Intermediaries have warned.

The trade body’s Quarterly Economic Bulletin read: “AMI is concerned that in some pockets of the market lenders are reluctant to offer borrowers longer-term stability on remortgage rates.

“Our members have noted that building societies in particular are focusing their efforts on making shorter-term fixed rates more competitive so that borrowers are less able to fix payments over five years without moving borrowers.

“Whether this also reflects uncertainty or a lack of confidence to sell longer-term fixed rates to borrowers remortgaging through execution-only mortgage sales is unknown.”

Ray Boulger, senior technical manager of John Charcol, said: “For some people taking out a 2-year fix does make a sense but if you are buying a fix to protect against rate rises it doesn’t make much sense.

“After two years you’ve got to factor in the cost of a product transfer or refinancing.

“If people have got less equity there is more of a case to take out a 2-year fix. At 95% LTV there’s a good chance you’ll be down to 90% in two years. Because there’s such a big differential between the two rates you can make a good case for taking a 2 or 3-year fix with a view to fixing after that time.”

AMI also said it was concerned by the rising student debt crippling the younger generations.

The trade body added: “Britain is building a debt mountain for the next generation which is already dramatically affecting affordability and is set only to get worse.

“The question is whether the government will be forced to forgive this debt at some point in the future – it is increasingly becoming a real risk for the economy and in future will drag even more heavily on affordability for those wishing to buy their first home.”

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