May CPD Newsbrief — Protection
Help to Buy cover challenges advisers
Protection advisers are struggling to arrange life cover for borrowers who have bought through the Help to Buy scheme.
Under the first phase of Help to Buy, which launched in April 2013, borrowers with a 5% deposit and hoping to buy a new-build property can secure a Government loan worth up to 20% of the property value. The loan is interest-free for five years and repayable on sale, with borrowers paying back 20% of the sale price.
This has created challenges for the protection industry, with some advisers claiming they will be reluctant to “over insure” clients for fear of a regulatory crackdown further down the line, and others pointing out that “creating a product based on a particular Government initiative could prove difficult given that there are no guarantees on how long the initiative might remain in place.”
Help to Buy has been extended until 2020, but it has already had a major impact. The number of first-time buyers is now at its highest level for seven years, according to LSL figures, but the size of the average deposit is at a three-year low.
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