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Mortgage Broker News | 09 Dec 2013, 12:00 AM Agree 0
Brokers may be compelled to advise clients to opt for a smaller mortgage, following a warning that homeowners may be ill-prepared to handle impending interest rate hikes.
  • Ron Butler | 09 Dec 2013, 09:34 AM Agree 0
    I used to think I was smart enough to predict the future of rates and housing prices. Eventually I realized I was wrong most of the time. I think that it's a dangerous thing to TELL the applicant that rates WILL be higher soon and they need to buy less house. I personally think it may all be true but as I said I have been wrong far more often than right about interest rates and markets.

    If you gave that same rate increase warning in 2010 you would have done your clients a disservice.

    I think it's best to caution the client and show them what higher rates look like in terms of payment shock but I really don't believe in telling the clients what to do.

    I can't see the future of the clients lives either. If they buy less house and then both get big promotions and have 2 kids and end up in a too small house I did them a disservice, they would have been better off taking the biggest house they could afford because we all know the transaction costs of selling and buying in a short time frame like 2 or 3 years should be avoided.

    If the clients lose their jobs or their marriage ends, well, a smaller house would not really be the fix they need either.

    My thought process in this is to be an honest merchant/broker, not pretend to be a rate or market predictor. Give great rates, rational cautions and fast service and leave the future to the tea readers.
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