Industry pundits have slammed high income multiples on variable and long-term fixed rates as “dangerous” and “deadly”.
Speaking at the Mortgage Business Expo in London, economist John Wriglesworth called for a ban on high income multiple variable rate products.
He warns that variable rate options pose a dangerous and unacceptable risk to consumers.
Wriglesworth says: “Variable rates with high income multiples are dangerous. With variable rates the exposure to risk is unacceptable and should be banned.”
Jonathan Cornell, technical director at Hamptons Mortgages, has no problem with high income multiple products but he worries long-term fixed rates are too much of a commitment for younger buyers.
Cornell says that while early repayment charges are sky high the majority of people – in particular first-time-buyers – should steer clear of them.
He says: “My view is that you should not force people to take out long-term fixed rates. First-time buyers are hammered by early repayment charges. It is too much of a commitment.
“Long-term fixed rates with high income multiples can be deadly for young people.”
Wriglesworth adds that lenders are relaxing their lending criteria too far.
Frank Eve, managing director of Frank Eve Consulting, agrees: “The industry might have gone mad. Lenders are desperate to lend, first-time buyers are desperate to get on the property ladder and home owners are desperate to get out of debt. Affordability is being stretched to the limit.”