14% of homeowners arranged their home insurance through their mortgage lender, and 30% of these (almost half a million homeowners) believed that they had to arrange their home insurance through their mortgage lender as a condition of their mortgage deal, acording to a new survey from Gocompare.com Home Insurance.
Furthermore, 24% of borrowers who arranged their insurance with their lender think that switching their insurance to another provider will invalidate their mortgage.
Meanwhile, 12% say they felt under pressure to buy their lender’s home insurance while 6% said they were told by their mortgage provider that they had to.
The practice of compulsory home insurance tied-in mortgage deals was never formally outlawed despite promises to do so in the late 1990s.
The survey also found that 14% thought buying their lender’s home insurance might help with their mortgage application and 9% said they didn’t realise they could buy cover elsewhere.
It also revealed that 34% of homeowners who arranged cover through their lender didn’t check cover levels and excesses to make sure they were buying the right policy.
Ben Wilson from Gocompare.com Home Insurance said: “We were shocked to find that so many people still think that their mortgage offer is conditional on buying their lender’s home insurance, and that a significant minority are essentially in a mortgage-linked insurance trap – believing that switching away from their lender’s insurance will invalidate their mortgage.
“We were also concerned that a handful of lenders could be exploiting their relationship with their customers by pushing them to buy their insurance cover.”
