According to Loans Warehouse, brokers should consider whether customers would be better off with a second loan to raise capital rather than locking in high rates on longer-term products.
The lender says that, especially in the current market, brokers need to consider second-term deals alongside regular products when customers want to raise money by taking out a new mortgage or taking out a further deposit.
With average fixed rates of two, three and five years at current levels, borrowers who raise capital by refinancing could be stuck with high interest rates for years due to early repayment charges.
In some cases, taking out a smaller second loan to raise capital rather than repaying the entire debt could give borrowers more flexibility to refinance in the future and potentially save them money in the long run, Loans Warehouse argues.
It says secured loans, or second payment mortgages, are increasingly being used as a way to raise capital without disrupting an existing mortgage.
This allows borrowers to access additional funds while maintaining their current interest rate and avoids having to take out a new long-term mortgage.
Co-founder Matt Tristram says: “The challenge for brokers right now is that no one has a clear picture of where interest rates are going over the next three months, let alone 12 to 24 months from now.
“In that environment, it could be short-sighted to lock customers into long-term mortgage products without considering alternative options.
“We are seeing a growing shift in the way capital is raised, with more borrowers actively seeking flexibility rather than committing to a full remortgage.”
Tristam adds: “In a stable market, the lowest rate is often the priority.
“But in today’s market, flexibility is becoming just as important, if not more so.”