Brokers hit back at Martin Lewis’s latest “irresponsible” mortgage advice
Martin Lewis needs to take more cation with what he's advising the public to do with their mortgages, he's not qualified to give advice for a start. Furthermore whats right for one person may not be right for another. Mortgage advice has to be tailored to each individuals needs as opposed to a one size fits all approach.
Article by Ryan Fowler in The Intermediary
Brokers have responded to statements made by Martin Lewis last night in relation to mortgages, specifically borrowers “tactically” going onto a standard variable rate.
Lewis was in hot water with brokers earlier this year after it was claimed that he was offering mortgage advice on TV. He told viewers of his ITV show that fixing now might work out costing more money in the long run.
He said: “The bottom line is the Bank of England base rate. If you are on a variable or discount or tracker mortgage, the amount you pay depends on that base rate.
“The top line is the cheapest 2-year fix that is available on the market for someone with a 60% loan-to-value (LTV). The very cheapest.
“Now if you look at that graph you will see they are not in sync. That is because they are not based on the Bank of England rates, they are based on something called swap rates which are mainly based on the gilt rate which you may have heard about in the news, the cost of government borrowing.
“So what you may have heard about in the mini-Budget, either caused by the mini-Budget or some would argue, coincidental apparently right, is UK Government borrowing got much more expensive and that translated almost immediately into mortgage rates.
“That 2-year fix is effectively based on the city’s future prediction of interest rates.
“Some people are thinking we may now be peaking at the fixed rates, which means you may want to hold onto your variable rate.
“A couple of weeks ago it was ‘grab a cheap fix while you can because rates are going up very quickly’.
“The entire economic situation has now changed and now we are probably moving into ‘hold on a little bit.
“Most variable rates are penalty-free. If you are tactically going onto the variable rate to see if cheaper fixes come down, check it’s penalty-free.
“You may just want to wait a little bit to see what happens.
But brokers have branded his comments “irresponsible” and “outlandish”. Here’s what they have had to say.
Lewis Shaw, founder and mortgage expert at Shaw Financial Services:
“Martin Lewis has been an excellent consumer champion in many respects, but last night on prime-time TV he stood up in front of millions telling them to stay on their standard variable rate when their fixed rate ends and wait for rates to come down.
“This is because his assessment of the economy is that we’re past the peak of the problem. This is irresponsible, firstly because he doesn’t know what markets will do, and secondly because he shouldn’t be telling people anything at all as he’s not authorised to give advice. 15 months ago he caused a mad scramble onto sub-1% 2-year fixed mortgage rates.
“I lost count of the number of conversations I had with customers saying, “well, Martin Lewis said X”, but fortunately I gave them 5-year deals counter to the ones he recommended and it’s a good job I did as they’d now be coming off 0.8% onto mortgage rates of 6%+.
“As it is, they’re sat on 1.14% for the next three and a half years. He should stay in his lane because he doesn’t know better.
“Also, the TV rules should do more to ensure there are huge disclaimers that he isn’t qualified to make recommendations or give advice, and that you should always consult a regulated mortgage adviser.”
Gaurav Shukla, sales manager at home me:
“For many, Martin Lewis is a financial guru. However, he should not be giving advice like this to anyone. He has a very large following and to tell them to sit and wait on an SVR is wrong.
“Advice should be given individually as it is determined by their circumstances and not generally as Martin Lewis has given.
“Where are his qualifications to give such advice? He has just given many people in the UK wrong advice, which will end up costing them hundreds or potentially thousands more. People should seek out expert advice from a qualified mortgage broker, and not listen to anyone else.”
Ross Boyd, CEO, Dashly:
“Much of the mortgage rate hysteria we have at present is totally unfounded. Yes, 2-year fixed rates are above 6% as lenders have no idea as to how far rates will rise due to the level of economic uncertainty, but people can still access variable rate products of under 3.5% with no, or a low, early redemption charge.
“The Bank of England will also be acutely aware that if standard variable mortgage rates rose to 8%, the economy would be on the verge of collapse.
“We need perspective and not hyperbole. While the price of fixed rates has skyrocketed thanks to the self-inflicted market turmoil, any good adviser will be helping their clients navigate all the options, including discounted and variable rates that are still much cheaper than standard variable rates.
“Right now, discounted rates and trackers look very attractive, especially those with low or no early redemption charges. While moving onto, or staying on an SVR may be appropriate for some, it may not be for others.
“Martin Lewis’s heart is in the right place but he should be urging people to seek independent advice from a broker that is tailored to their specific needs.”
Rhys Schofield, managing director at Peak Money:
“This advice, which shouldn’t have been given anyway without doing a nationwide fact find, was wrong. If someone does want to sit and wait and see, how is sitting on a standard variable rate better than a tracker that may be half the rate and carry no early redemption charges?
Jamie Lennox, director at Dimora Mortgages:
“For many, Martin Lewis is a messiah of the financial world. However, he’s playing a very fine line of advising on a subject that I believe he’s not officially qualified in.
“Outlandish statements like this can be extremely dangerous if people take his word as gospel, as financial advice is not a one-size-fits-all approach and could leave some households in real financial difficulty.”
James Miles, director – mortgage adviser at The Mortgage Quarter:
“Get that fella off the TV and let’s see his CeMap papers. Since when has sound financial advice been given on speculation. What he should have said is speak to a professional and work around what’s best and most appropriate for you.”
Samuel Mather-Holgate, independent financial advisor at Mather and Murray Financial:
“Martin Lewis is a very contrarian economist if he thinks mortgage rates are coming down in the short term. Most sensible economists think rates will peak much later next year and could be up to 3% higher than they are now. Once they reach that level, they’ll take a while to start falling.
“He doesn’t have the same type of client as I do, if he thinks they can withstand that kind of shock.”
Jonathan Burridge, founding adviser at We Are Money:
“It is not an unreasonable suggestion to move onto an SVR, however it is a risky strategy. I would rather a financial journalist of Lewis’s experience not telling people to do it, but suggesting it as an option.
“It is one that should be discussed because, for a lot of people, it will be appropriate. Good on him to look beyond fixed rates.”
Craig Fish, founder & director at Lodestone Mortgages & Protection:
“Mystic Martin. What a guy. He’s obviously got a top-of-the-range crystal ball to be making flippant statements like he did on Tuesday night.
“The last thing a borrower should do is stay on an SVR. Average SVRs are around 5%-6%. If a borrower wants to buy some time to see what will happen to rates, then I recommend they opt for a tracker with no early redemption penalty.
“When you can get these for around 3%, you can see it’s a no-brainer. If rates then come down and a client is ready to fix, we can do so with no penalty to them.
“Martin is a great advocate for consumer fairness, but seriously, stick to your job mate and let the professionals do theirs. You have to fully assess a person’s needs before advising on anything. He should know better.”
Anil Mistry, director and mortgage broker at RNR Mortgage Solutions:
“What Martin is doing is totally wrong. He is, effectively, advising borrowers and he is not qualified to do that, and the FCA should take action here.
“Every borrower’s circumstances and risk appetite is different. You can’t paint the same picture for everyone. It is the media, like himself, that are making brokers’ jobs more difficult, and causing more anxiety and stress for borrowers.
Marcus Wright, managing director at Bolton Business Finance:
“It’s probably not best to give advice on regulated mortgage products to millions without knowing their individual circumstances.
“Anyone who says they know for certain what will happen with rates and the economy is a liar. They might come down or they might not. Nobody knows.”