Mortgage brokers steering borrowers to two-year fixes to line their pockets, whistleblower claims

Some mortgage brokers are steering borrowers towards two-year fixed rates in order to collect more commission - even when it is not the best option for them.

That is the claim from a whistleblower working for a major mortgage lender, who has spoken to This is Money under condition of anonymity.

It comes as new data revealed borrowers are moving decisively away from long term fixed mortgages, with demand for ten year deals dropping to its lowest level in years.

Searches for two year fixed rates by mortgage brokers rose from 41 per cent in January to 53 per cent in August, according to new data from Twenty7tec.

Three and five year fixes account for less than 35 per cent of searches, which is broadly where it has been all year.

However, those looking for longer than five year fixes - typically 10 years - account for just 12 per cent of searches, down from 23 per cent at the start of the year.

In terms of actual recommendations sent by brokers to customers - a document known as an European Standardised Information Sheet (ESIS), 50 per cent of these have been two-year fixes in 2025 compared to 45 per cent for five-year fixes.

That differs from last year, when marginally more recommendations were made for five-year fixes than for two-year deals.

Whether taking a two or five-year fix is the best move is up for debate, and given the mortgage rate spikes of the past few years, borrowers are understandably keen to get the right advice.

'We are seeing a planned pivot back to shorter fixes,' said Nakita Moss, head of product at Twenty7tec.

'With rates easing and a huge wave of borrowers coming to the end of their five year Covid-era deals, many are choosing to keep their options open.

Nathan Reilly, commercial director at Twenty7tec added: 'Advisers are in a crucial position right now. With so many clients coming off five year fixes, the conversation isn’t just about finding the lowest rate, it’s about balancing certainty with flexibility.'

Rates have gradually fallen for most of this year, but have seen small rises of late due to higher inflation readings and jitters on the financial markets.

If mortgage rates rise more, as some are predicting, it could be better to lock in for five years now to avoid remortgaging more expensively in two years.

The whistleblower therefore thinks a broker recommending two-year deals to most of their clients would be unwise.

He told This is Money: 'Brokers appear to be flogging two-year fixes to customers at a time when this is just incredibly risky advice.

'If mortgage rates go up again, this will mean more than half of all mortgage holders end up getting screwed all over again.

'I've been coming across brokers saying they have recommended all their customers take two-year fixes.

'Either brokers don't understand how mortgages get priced - or perhaps more likely, they are doing it to get paid more.'

Whether to take a two or five-year fix also depends on the homeowner's own circumstances and preferences, for example if they think they might need to move home before the mortgage term would end.

Mortgage brokers are paid commission by the lender each time they arrange a new mortgage, which is typically between 0.35 and 0.4 per cent of the total mortgage value.

At present, the lender pays a broker commission on the successful sale of each mortgage deal. A broker gets paid the same for recommending a two-year deal as a five-year deal.

Fixing a customer for two years means they might return in two years, allowing a broker to get another round of commission, rather than waiting for five years.

Many brokers also charge their own fees to customers, which are often between £500 and £1,000 each time they arrange their mortgage.

In some cases, brokers charge customers a percentage of the mortgage amount. That can mount up, especially if you have a large mortgage. For example, 1 per cent on a £500,000 mortgage would equate to a £5,000 fee.

This is Money's source thinks that the way brokers are incentivised needs to change.

He said: 'Lenders cannot "incentivise one product over another" based on FCA rules – this means a broker gets paid the same for selling a two, three, five, 10 or 25-year fixed rate. Why would a broker sell a longer-term product?'

He also believes the FCA needs to introduce rules that stop lenders paying commission to brokers in the form of an upfront lump sum.

'Commission should be paid as an annual sum, based on whether the loan is still with the lender,' he says. 'This would even it out across all products and incentivises rational behaviour.'

Most mortgage brokers are regulated by the Financial Conduct Authority, which requires them to act in the best interests of their customers.

Brokers we spoke to said there are many reasons why a two-year fixed rate deal might genuinely be the best option for a customer - not least that they are very slightly cheaper than five-year ones at present.

Two-year fixes are at 4.98 per cent on average, according to Moneyfacts, while five-year fixes are at 5.02 per cent.

There will be many households who specifically request a two-year fix, rather than acting on the advice of their brokers.

Aaron Strutt of broker Trinity Financial says: 'Most borrowers want the cheapest rates at the moment understandably because many of them have had huge repayment shocks.

'Two-year fixes are cheaper than five-year deals, which is something we have not been used to for quite some time. There is a genuine belief that rates will be cheaper in a few years.

'Some brokers may prefer to put their clients on shorter-term deals, but the overwhelming majority want to give the best advice based on their situation.'

Nicholas Mendes of mortgage broker John Charcol agrees that low rates are the key driver of the rise in two-year fixes - not commission incentives.

'This misses what's really driving consumer behaviour right now,' says Mendes.

'The reality is that two-year fixes are currently priced cheaper than equivalent five-year deals, which makes them attractive for borrowers focused on keeping costs down.

'Clients are looking to benefit from reviewing their product sooner, rather than being tied into a five year deal and potentially paying a costly early repayment charge should they come out of it.'

This is Money shared the whistleblower's concerns with the Financial Conduct Authority, which said: 'Mortgage brokers must consider the needs and circumstances of their customers and recommend products which meet these.

'This includes considering how long to fix payments for – for some customers a shorter fix will be the right product.'

It also mentioned that the new Consumer Duty, a new set of rules for financial firms introduced in 2023, also required brokers to offer customers 'clear information and products which are right for them'.

In addition, the FCA wrote to chief executives in January this year saying it wanted mortgage brokers to 'do more to ensure customers have considered their options.'

Firms, it wrote, must 'consider customers’ personal and financial circumstances, financial objectives, and provide appropriate information to enable them to make effective decisions'.

Mortgage rates have broadly shifted downwards for the past two years, but whether that will continue is far from clear.

Earlier this week, the Bank of England Governor warned there was now 'considerably more doubt' about further interest rate cuts.

Andrew Bailey told MPs that while he continued to expect rates to come down, it was harder to say when that would happen after inflation rose more quickly than expected in July.

The Bank's Monetary Policy Committee cut its benchmark rate from 4.25 per cent to 4 per cent last month, but markets are not pricing in another quarter-point cut until the spring of next year.

Bailey appeared to recognise this, saying the Bank's message 'has been understood' by markets.

But even if interest rates do fall as expected in spring 2026, it is unlikely to have an immediate impact on fixed rate mortgage pricing.

The price of fixed mortgages is based on Sonia swap rates - the inter-bank lending rates which are based on expectations of where rates will be in the future.

Sonia swaps over two and five years are currently below the Bank of England base rate. This means mortgage rates are already being priced with future interest rate cuts factored in.

It is why the cheapest two-year fix on offer is currently 3.78 per cent, whereas the Bank of England base rate is 4 per cent.

In recent weeks, swaps have been rising. Since 1 August, two-year Sonia swaps have risen from 3.56 per cent to 3.69 per cent, while five-year swaps have gone from 3.63 per cent to 3.76 per cent.

The margin between Sonia swaps and the lowest mortgage rates is so slight that it's highly unlikely mortgage rates will go lower any time soon.

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In fact, prior to interest rates rocketing in 2022, the margin between the lowest fixed rates and the equivalent swaps was closer to 1 percentage point, rather than 0.07 percentage points as they are today.

This means that based on the current trajectory, mortgage rates are essentially as good as they'll get. That is, unless future interest rate expectations change.

It is also likely we will see mortgage rates rise over the coming weeks. Barclays and Nationwide have both put up their mortgage rates recently.

'We saw a handful of lenders edge fixed rates up after the Bank of England’s split decision last month and the stronger-than-expected wage growth that followed,' said Hina Bhudia, a partner at Knight Frank Finance.

'The increases may only be a few tenths of a percentage point, but for borrowers that translates into a meaningful rise in monthly payments and will weigh further on sentiment already under strain from reports of tax hikes and likely changes to property taxation.'

Our mortgage industry whistleblower thinks that rather than recommending shorter term fixed rate deals, brokers should be selling longer-term fixed rates.

'The UK mortgage market has a fixation with selling short-term fixed rates even when the conditions say otherwise,' the unnamed source told This is Money.

'With over 55 per cent of mortgages on two year fixes it means that, if we get another Black Swan event or just simply rising rates, over half UK mortgage holders are exposed to rising payments.

'That could have big implications for the economy and housing market.'