Increase in borrowers seeking compensation on 2-year fixes

If a 2-year fixed rate mortgage was recommended at the time, and it was the right advice for the borrower, then any complaint is unlikely to be upheld. However, it's important to consider why a broker would suggest a 2-year deal during a period of historically ultra-low interest rates, when a 5-year deal would have been a more suitable option for a borrower with no plans to move or pay off their mortgage within that time frame. As a responsible broker, I always advise my clients to consider their options carefully and only recommend a 2-year deal if it is truly the best option for them. In fact, the majority of the deals I have arranged over the past few years have been 5-year fixed rates, which were completely appropriate for the clients' needs. When a 5-year deal was not the best option, we explored other alternatives together.

As a specialist consultancy in complaints management, we are seeing an increase in enquiries from mortgage brokers, where their clients have raised the issue of having taken out a 2-year fix rather than, say, a 5-year fix, meaning they will be exposed to higher interest rates sooner. So far, the larger, more active claims management companies haven’t rolled out their marketing campaigns at full speed as they are likely still making money on mis-sold pensions, but the number of mortgage complaints and claims will inevitably increase, regardless of whether they have any merit. At some point soon, we may see a more concerted campaign from the large claims companies targeting brokers.

This grinds my gears. Brokers are often expected to don many hats for their clients, from helping with their property search, advising on their mortgage and relevant protection needs, to helping with the often inadequate legal process. Hindsight is a wonderful thing, and sure, had we known Russia was going to invade Ukraine, that the Number 10 door would turn into a revolving one, and utility firms would be allowed to clean up whilst most people can't afford to heat their home, our advice may have changed for some. However, whatever was recommended to the client would have been backed up by a detailed fact-find process, explained thoroughly in a suitability letter and no doubt would have been best for the client at that time. You can't have your cake and eat it. If rates continue to fall over the next 18 months or so, no doubt these firms will be encouraging people who took a 5-year fixed rate to claim they were misadvised as they cannot jump onto a cheaper deal without penalty fees.

As brokers, we make a recommendation based on the facts obtained during the fact-find process. Whether to recommend a 2, 5 or even a 10-year fixed rate depends on the borrower's situation now and where they wish to be in the future. Do they have plans to move in the foreseeable future, do they plan to have a family or do they have adverse credit? Each borrower is unique and no two applications are the same.

I hope this doesn't become a "thing", namely to make a decision and then look to get compensation from your adviser if the decision you ultimately took ends up being the wrong one. Would they be looking for recompense if they'd gone for 5-year fixes and rates had gone down, too? The notes and documentation around the meeting and the advice given to the client are going to be key. That being said, I have seen some advisers on social media making some very bold claims about how "all clients should be on trackers" or similar, so it is also possible that a very small number of the claims may be valid if a particularly bullish adviser failed to actually provide tailored advice to the client and simply "sold them" what he or she thought was best at that time. Either way, I can't see this being the same tsunami of claims as we saw with PPI, as the vast majority of cases will be correctly advised via a professional and the client got exactly the right product at that time, for their needs.

Advisers assess and recommend the needs of clients at the time of advice. Unfortunately, we do not have a crystal ball on what the future holds, especially when new administrations enter government. An adviser’s backup is often found in a very detailed suitability report, including background to the appointment with CRM notes. The mind boggles with this blame society of passing responsibility for clients making a wrong decision, similar to complaints over early redemption penalties. It’s a cake and eat it scenario.

The presence of ambulance chasers has become a pervasive phenomenon in the UK, much to the dismay of many. However, if the mortgage recommendation is supported by thorough documentation, the chances of a successful claim for the claimant may be limited.

I don't know if we should laugh or cry. During the course of your 25-35 year mortgage, it is unlikely interest rates are always going to be in your favour. If this is allowed then it will just open the floodgates every time someone is not happy with their new rate, which will just mean that our recommendations and suitability letters will start to have more legal wording, signed to cover ourselves in the future. This is likely to mean mortgage advisers will start charging higher fees. In short, it will have a drastic knock-on effect. I can't remember all this hysteria in 2008 when interest rates were a lot higher than now, but our culture has clearly changed and it is worrying.