“If your client has a heart attack make sure they lose their mortgage not their home.” This expression was one I heard many years ago but one that should be brought to the fore again today with the potential for decreasing protection sales, now mortgage sales are on the rise again.
We have all seen an increase in demand for mortgages over the past three to six months, due to a rise in consumer confidence and some fabulous products from lenders. The rise in demand is really great news, but when we are selling a mortgage just how much attention do we or our clients pay to the small print?
Every mortgage and loan promotion has to carry the phrase “Your home may be repossessed if you do not keep up repayments on a mortgage or any other debt secured on it.” but how much attention do we give to this phrase when arranging a mortgage for a client, and how aware are clients of such a risk or wealth warning – despite the fact that it is on every financial promotion?
Risk warnings are there for a reason, but I don’t think we make enough of the wealth warning about keeping up payments on a mortgage and the implications of not doing so. It should not be treated as small print as it’s a vital message – and it can also be the first step in crucial protection sales.
How many advisers really make their clients aware of the eventualities that may lead to them not being able to pay their mortgage at the point of the mortgage being arranged? When a client is excited about buying a new home it may seem like a bit of a downer to talk about them losing the house that they haven’t yet bought, but this is just the time that they need to think about the implications of what they are taking on. It is worth going back to basics and getting them to think about the implications on their ability to pay for their mortgage and their bills should they suffer the death of a partner, a critical illness or long term sickness, suffer redundancy or lose their job.
All of these are in an adviser’s control to help. An adviser may not be able to stop such an unfortunate event from occurring, but they can make sure that their client doesn’t lose their home as a result of it. It really is best practice to talk about the need for protection at the same time as discussing the need for a mortgage when it can be packaged as a total solution.
It is a sad fact that almost everybody will ensure their car, whether it costs £30,000 or just £3000, because the government says they should, but only a tiny fraction of those people will ensure themselves or the income they need to keep that car on the road.
Recently there was a horrifying accident in Kent, which I’m sure everybody heard about, involving 130 cars. Fortunately there were no fatalities although there were many people seriously hurt. In that pile up, I’m sure almost every car would have been insured, but what are the implications for the people hurt who may be unable to work for some time? Some will still be paid by their employer, but there will be many affected who will not.
Research by Legal & General shows that the average UK household has enough in savings to survive financially for just 18 days of not working. Another statistic from Macmillan research has the almost unbelievable fact that 18% of people who get cancer struggle to keep up mortgage payments following diagnosis, and 6% go on to lose their home through repossession. How much will these unfortunate people wish that their mortgage adviser had had the uncomfortable conversation with them at the point they took out their mortgage because it would have been a lot better than what they suffered subsequently?
Arrange a mortgage and your client gets a house; with protection they get to keep their home.
Karen Hedges is mortgage manager for TMA and First Complete