This year looks to be one of two halves for the property and mortgage markets, with first-time buyers and home-movers in the ‘race for space’, looking to complete before the extended stamp duty deadline, and existing borrowers looking to reduce their total mortgage costs through remortgages and product-transfers.

Rising house prices/equity, low interest rates, longer fixed-rate deals and increased lender competition, have all meant that remortgages and product-transfers for all types of borrower, have remained strong, with more than half using 5- or 10- year fixed rate deals, according to LMS figures.

As much as 98% (by value) of all residential loans and 90% of buy-to-let business are sold subject to advice.  Additionally, 60% of product-transfers are currently advised, UK Finance figures found– which is set to increase as more lenders are willing to pay procuration fees – and whilst these may be lower compared to remortgages, selling protection alongside can help to increase your income.

So, at a time when the pandemic has increased client’s awareness of the need for protection, now may be the only time for the next five years to review your client’s mortgage protection needs.

Indeed, research from Royal London in 2018 suggested that there are almost 11m households in the UK with a mortgage, but at least 42% of them have no life insurance, and worse still, 81% have no form of income protection.

Existing borrowers 

A couple now aged 36, whose first repayment mortgage for £200k was fixed at 3.91% five years ago, with decreasing life cover only, would have total mortgage costs of £1,049pm.

With a lower LTV, they could do a product-transfer to a new 1.87% five-year fixed rate.  In addition, as they now have two children and want further security for their family, a new decreasing term and critical illness plan, with children’s CI benefit, and income protection of £2,282pm and £1,149pm (for salaries of £45,000 and £20,000 with a 13-week deferred period and payable for up to two years), would reduce their total mortgage costs to £960pm, a saving of £89pm – more cover, less cost!

Many five-year fixed rate mortgages arranged in the run-up to the 3% stamp duty surcharge in April 2016, are expiring in the coming months, which could prompt a significant increase in remortgage business and may help offset some of the negative impact of tax-relief changes.  Some of these existing mortgages will have been completed without life insurance, which landlords may need, to avoid the property being sold on their death to repay interest-only mortgages.

For example, the average five-year deal in Q1 2016 for individual landlords was 3.84%, meaning they would have been paying around £480pm on a £150,000 interest-only mortgage.

Using a new five-year 2.54% remortgage deal (75% LTV), together with a 20-year £150,000 level term plan for a landlord aged 50 would reduce their total mortgage costs to £350pm – a saving of £130pm.  They might also consider increasing the sum assured to protect their equity in the property.

So, 2021 could be the year to better protect your clients and their families, by ‘remapping’ your protection business.

Andy Woollon is IFA retail specialist at Zurich Insurance