John Wriglesworth, managing director of the Wriglesworth Consultancy, speaking at the Mortgage Business Expo, accused brokers of churning out short-term deals and said they should explain 2 per cent interest rate variations as well as the 1 per cent currently required.
He said intermediaries would be giving better advice if they recommended longer-term fixed rate loans so their clients insure themselves against possible future interest rate rises.
He said: “Clients know their incomes. They take out insurance against their house burning down or being robbed but neglect to do it, in full, against their mortgage.
“If at the end of a short-term fixed or discount deal interest rates have risen people could be facing a huge repayment increase that they could struggle to afford.”
James Cotton, mortgage specialist at London & Country, said: “I agree that fixed rates equal stability. Brokers must advise on suitability and affordability by taking into account rates of repayment as they are now and what they may be in the future.
“KFIs have brought transparency so borrowers will have clarity when it comes to the repayment costs. As for ‘mis-selling’ this remains to be seen.”
