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What do longer term fixed-rates mean for the advice market? – Marketwatch

  • 14/03/2018
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What do longer term fixed-rates mean for the advice market? – Marketwatch
The Bank of England has repeatedly suggested it might keep raising interest rates, bringing an end to the era of ultra-cheap money.


Borrowers appear to have responded to the change in policy by locking into longer-term mortgage fixes.

But how might a contracting remortgage market impact brokers?

We asked this week’s Marketwatch panel what the trend for longer term mortgage fixes means for the advice market.


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Ben Merritt, mortgage manager at Accord

We’ve seen a growing trend in borrowers locking into longer-term deals recently.

The number of applications for five-year fixes we received from remortgage customers increased by 30% from January 2017 to December 2017, and this trend has continued into 2018.

With a potential further Bank of England rate rise on the horizon, borrowers are understandably turning to longer term deals for assurance during a period of economic and political uncertainty.

This may mean fewer borrowers may need to seek advice in two or three years’ time.

However, it’s important for both brokers and lenders to provide the best possible products, advice and service, rather than focusing on short term risks.

At a time when interest rates are in flux, it’s important borrowers have a mortgage product that gives them the best overall value.

Advising a client to apply for a deal that will provide good long-term value doesn’t necessarily mean it will jeopardise a broker’s relationship with them in the future.

Life isn’t static, and a borrower may have to bend with a change in their circumstances during the fixed rate term, such as buying a new home, which could mean they need further advice and possibly amend their mortgage deal sooner than they initially expected.

Longer term fixes don’t suit everyone, so there’s always going to be a market for two and three-year mortgages.

Giving a client counsel that’s in their best interests will most likely result in repeat business when the time is right – whether that’s in the short or longer term.


daniel baileyDaniel Bailey, mortgage broker, Middleton Finance  

The majority of clients I see are interested in seeing figures for a two-year and a five-year fix which allows them to make a comparison.

We go through the options together discussing their plans for the future and the pros and cons of each deal.

Usually at the end of these discussions the client has a good idea which deal will suit their circumstances best.

No one can predict the future especially in the mortgage market and when it comes to mortgage rates.

I have certainly seen a shift from two-year fixing to five-year fixing over the last two years.

A number of reasons given from clients, we don’t want to be going through the process again in two years and potentially incurring costs to they think now is a good time to lock into a longer term deal.

Fixing for longer in the buy-to-let market is often the only choice for many as the stress testing is more generous than a two-year fix.

I have only ever arranged two 10-year fixed deals.

I think they are very niche products and the two clients I arranged them for were in there mid 50s and wanted the 10-year term, as they had no intention of moving and it would take them to the end of their mortgage life.

Whatever term my client decides to fix for I diarise to contact them six months before the deal ends, I never want to see a client going onto Standard Variable Rate.


Mark-Lofthouse-Mortgage-BrainMark Lofthouse, chief executive at Mortgage Brain
The truth is that if longer-term fixed rates are right for the customer, then they are also good for the broker.

A broker who only focusses on selling mortgages is harming both themselves and their customers.

The important thing is to be regularly assessing their customer’s circumstances and making recommendations as appropriate – this is doing the job thoroughly and properly.

Successful brokers build long term relationships, and that has benefits for everyone.

Just because a five-year fixed mortgage product was the best on day one doesn’t mean it’s going to be the only financial advice required for the next five years.

And it doesn’t just have to be about mortgages and loans.

There are numerous other financial products which benefit customers, all of which give brokers the opportunity to keep in touch with their customers.

All this, of course, is easier said than done.

Brokers and their customers are busy people and it can sometimes be hard to arrange regular reviews and time passes by quickly.

A solution here is to let technology take the strain and point of sale/CRM systems are geared to do this.

Some of the best CRM systems will ensure reviews are done regularly and make sure that consistent customer service is delivered.

Client Portals come in to their own for updating information and secure communications and are not restricted to appointment times.

Longer-term fixed rates don’t harm brokers but poor service and inappropriate advice does.



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