To fix or not to fix? That is the question concerning a lot of brokers at the moment. Trying to call the next move in interest rates, house prices and the mortgage market can be mind-boggling.
The truth is that there is no definitive answer but this should not be seen as a concern, rather an opportunity to show the benefits of advice.
Much depends on clients’ ability to cope with unpredictable issues such as rises in the Bank of England base rate on their mortgage.
For example, tracker products are great value right now and offer lower monthly payments than fixed rates. But the base rate must rise eventually so this advantage could be short-lived.
The consensus on the base rate is that it is unlikely to move much in 2010 but with increases expected in the next two to three years there is merit in not being tied into a tracker long term.
There’s an opportunity for brokers to add value to their advice by offering stress testing on various interest rate scenarios. If these raise concerns over a client’s ability to cope a fixed rate could be suitable, despite being more expensive at first.
Fixed rates are competitive and there are plenty of signs that competition is getting stronger.
We believe that quality mortgage advice is the key. That’s why we are behind Mortgage Strategy’s Define Advice campaign to boost understanding of what the broker sector offers.