Credit: ITV

Brokers react to Martin Lewis mortgage ‘ticking time bomb’ warning

Mortgage brokers have been quick to react to comments made by ITV finance expert Martin Lewis that borrowers faced a mortgage ‘ticking time bomb’.

Lewis issued the warning last night on a one off special of his ITV show suggesting homeowners prepare in advance and lock in a new cheap mortgage now to try and avoid higher interest rates.

When asked by a viewer about re-fixing a mortgage deal when their current deal expires Lewis said: “Now if you look at the impact on mortgages, six months ago you could get mortgage deals below 1%, mortgage fixes below 1%, the cheapest fixes are now double that at 2.1%.

“So the cost of getting a mortgage is going up. And if I’m honest I have some real concerns about mortgages right now. This is the concern, we’re seeing rates go up, but you also have to remember to get a mortgage, to be accepted, you have to pass a credit check and an affordability check.

“And an affordability check examines “have you got room to pay this mortgage”.

“Now we are clearly in the midst of a cost of living crisis. So everybody has less room than they did before because other costs have gone up. 

“So my great fear is we’re seeing interest rates go up and fewer people are going to be accepted when they apply for a mortgage because more are going to fail affordability checks.

“And that leaves us with a ticking time bomb because most people are on cheap fixes and they’re going to expect to fix again on the cheap rate and it’s going to be a lot higher and they may not be able to get them and that is a real problem coming forward.’

“So if you’re coming to the end of your rate, you need to prepare in advance. 

“You might even want to pay a booking fee to lock in a cheap mortgage in case things get more expensive and if it doesn’t you can get a cheaper one elsewhere, so it’s like an insurance policy so you lose a few hundred quid having locked in a cheap mortgage. Speak to a mortgage broker for help.

“As for two or 5-year deal? Well if things are going up and you want certainty and you can get a cheap five year deal, a five year deal gives you certainty.”

Reaction

Lewis Shaw, founder of Mansfield-based Shaw Financial Services: 

“Martin Lewis has been a great consumer champion and fought for added consumer protections, held enormous institutions to account and helped millions to save money in ingenious ways and that should be applauded.

“However, it is scandalous that anyone can stand up on live TV and make broad-brush statements, essentially giving mortgage advice, which is regulated by the FCA, to millions of already panic-stricken Brits. 

“If I were to stand up in front of a room full of people, let alone a nation actively looking for ‘hacks’ to save money due to the cost of living crisis, and say the same things, the FCA would be feeling my collar very quickly.

“Rightly so because any form of financial advice, be it regarding mortgages, investments, pensions, life assurance or equity release and everything in between, has to be client-centred and consider their individual specific needs and circumstances.

“To just make bold statements such as ‘mortgages are a ticking time bomb’ does nothing to help anyone. I and other countless brokers and financial advisers tear our hair out each time it happens and it’s time it was stopped.”

Imran Hussain, director at Nottingham-based Harmony Financial Services: 

“Martin Lewis may not be a qualified financial adviser but his heart is in the right place as he is always here to champion rights for consumers and always on hand with money-saving tips. The issue around paying booking fees to secure the best rate is a little off the mark as, for borrowers, it’s always about the best product for their circumstances.

“Anyone thinking I’ll simply pay a lender a £1995 booking fee and that’s the mortgage sorted will be in for a shock as that’s not how it works.

“People should speak to a qualified adviser about their circumstances to ensure they get the best mortgage deal.”

David Robinson, co-founder and chartered wealth manager at Wildcat Law

“Winter is coming, but beware those who preach the apocalypse. Homeowners have benefited from record low interest rates since 2016 and for many it is all they have known. Can we expect mortgage rates to go up? Yes.

“With the popularity of 2-year fixed rate deals, especially among “non-advised” homeowners, will we see mortgage shock being experienced by many? Most certainly.  

“Will it cause foreclosures and mass repossessions? I don’t think so. Why? Because in 2014 something called the Mortgage Market Review came into force and as part of this the industry introduced stress testing to ensure borrowers could afford to maintain payments at a hypothetical higher rate.

“Well, we may just be entering hypothetical rate territory. The other reason for optimism is many new borrowers will have borrowed at 95% loan to values, which carry a significant premium over a more standard value.

“House prices have risen to such an extent that many of these people will benefit from lower rates available to 80% LTV mortgagees, when they exit their fixed deals, just when they need it.”

Rob Peters, director of Altrincham-based Simple Fast Mortgage

“It’s important not to get fixated on booking fees alone and miss the big picture here. The most suitable mortgage is the cheapest overall mortgage that meets the borrower’s circumstances and priorities.

“This takes into account all the fees and the interest rate, as well as any incentives such as cashback or a free valuation or legal service.

“This can be compared over the initial fixed rate period to give a true overall cost for the mortgage. Looking at one aspect of a mortgage in isolation is a sure fire way to end up with a more expensive overall mortgage deal.”

Scott Taylor-Barr of Shropshire-based broker, Carl Summers Financial Services

“The act of paying a booking fee does not secure you the interest rate with the lender, it is the act of making the application that secures you the rate.

“So don’t discount a deal that could be perfect for you simply because it does not have a booking fee.

“In fact, very few lenders have booking fees on their mortgage deals currently, so there is a very good chance people would miss out on many more suitable and cheaper deals if they blindly went in search of one simply on the basis that it had a booking fee and others didn’t.”

Robert Payne, director of Bristol-based Langley House Mortgages: 

“The advice to secure a rate as soon as possible is absolutely correct as they have been rising sharply and continue to do so but the information around a booking fee is largely inaccurate as you can secure a new rate in most cases without paying any upfront fees.”

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