Mr Young said it boils down to whether a borrower went into the mortgage aware of their options. He added: “Covering up other options to get a higher commission would leave a broker in more trouble.”
A spokesman for the ombudsman told The Telegraph someone who took out a two-year deal in 2021 could now complain and allege that they received bad advice on the back of changing interest rates.
The ombudsman said it would consider both on what the consumer’s needs and circumstances were at the time, and also on the actual advice given.
“Possible movements in interest rates are only one factor when considering whether a particular product is suitable,” it said.
If a broker was to be ruled against by the ombudsman, the borrower would be entitled to compensation which a broker would pay drawing on their professional indemnity insurance.
A consumer can win up to £415,000 from a firm if they file their complaint to the ombudsman from April 2023 onwards, as long as the complaint relates to an event after April 2019.
Five-year fixes ‘the obvious choice”
Shaw is not the only broker of the belief that five-year fixes were the obvious choice for the majority of his clients during a period which saw banks charge record low interest rates.
Samuel Gee, director of Manning Gee Investments Limited, said: “It’s important to consider why a broker would suggest a two-year deal during a period of historically ultra-low interest rates.
“A five-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. The majority of the deals I have arranged over the past few years have been with five-year fixed rates.”
Other brokers have been quick to label professional negligence claim firms helping borrowers as “ambulance chasers”.
Gary Boakes, director of Verve Financial, said: “Our culture has clearly changed and it is worrying. If this is allowed then it will just open the floodgates every time someone is not happy with their new rate.”
Mr Boakes argued that this would increase the legal paperwork for brokers and ultimately their fees. “It will have a drastic knock-on effect.”
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