View more on these topics

ABI warns life cover gap is widening on mortgages

The ABI is concerned over the growing gap between the number of mortgages and mortgage extensions and the number of term life insurance policies that are taken out to cover homeloans.

Its report, The Mortgage Market – A Growing Life Insurance Gap?, says one in four mortgage holders has insufficient life insurance to cover their mortgage debt. The average life insurance gap for mortgage borrowers without sufficient cover is nearly £40,000, suggesting that the gap between total life insurance and mortgage debt stands at £113bn.

The ABI&#39s research shows that since 1994, mortgage debt has increased by 8.4 per cent a year but the total value of life insurance cover has grown by only 4.5 per cent a year in that time.

Currently, 63 per cent of new homeloans are remortgages or further advances compared with around 34 per cent in 1994.

Research commissioned by Egg in August shows that three out of four of these borrowers make no attempt to insure their additional debt.

The ABI report says high house prices in recent years may have forced homebuyers, especially first-time buyers, to overstretch themselves and many may think life insurance is too expensive.

According to the Office of the Deputy Prime Minister, a shift to single person households to around 30 per cent by 2021 will also result in fewer life policies being taken out.

ABI chief economist and head of research James Sproule says: “Borrowers with dependants need a greater appreciation of the advantages of life insurance.”

A Wills & Co director Arnold Wills says: “This is another case for consumers to seek professional financial advice. The high street is not necessarily the place to get advice.”

Recommended

Ex-board members say merger failure would be a disaster

If the merger between Sofa and the LIA fails to go ahead it will be disastrous for the industry, according to former board members of both organisations. Ex-Sofa director Jo Smith says the merger is for the good of the industry, and if it is rejected by the membership it will be humiliating. She says: […]

&#39Nationwide calls halt on new direct broker deals&#39

Purely Mortgages chief executive Mark Chilton says Nationwide has told him it will not be taking on any more new direct intermediaries as it prepares for M-Day despite being in talks with them since June. The move would effectively stop smaller brokers from being able to pass any business with Nationwide and cuts out intermediaries […]

Destini to stagger pipeline pay to keep Lifeboat members

Destini will not pay all outstanding pipeline commission to Lifeboat members until the end of November. The IFA consolidator, which bought IFA and non-regulated network Lifeboat last week, is asking Lifeboat&#39s registered individuals to sign a six-month contract with a three-month notice period, which effectively amounts to a nine-month contract. RIs will receive half of […]

Penrose boxing

For those looking for a PR agency with a bit of a kick that pulls no punches, the Diary can only recommend Penrose Financial. Louise Hatch and three of her staff are learning to kickbox. As if she wasn&#39t intimidating enough. So if the powers of persuasion fail to elicit the correct response from various […]

Scheme pays explained

By Fiona Hanrahan, senior product insight and technical support analyst We’ve received lots of queries on scheme pays and when it can be used. This article explains how it works and the conditions which apply. What is ‘scheme pays’? If an individual exceeds the annual allowance (AA) and an AA tax charge is due, they […]

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

    Leave a comment