Naturally, this was not good news for savers but the news will have been taken slightly better by those who’re borrowing money. And in the UK there are quite a few of us, with the mortgage being by far the biggest debt taken on by the majority of households. There’s an estimated 9.3 million households in the UK with a mortgage and the typical amount left to pay is £116,000*
Looking at current house price data, we can calculate that a 0.25% cut means roughly a £20 reduction in the monthly mortgage bill based on a 25-year variable repayment mortgage of £143,500 which is currently the average loan amount for a new mortgage. Now an extra £20 a month doesn’t sound very much, what does that buy you these days - two cinema tickets, a few drinks at the pub?
But if we link this extra cash back to the mortgage and how protecting it should something drastic happen then that £20 could come in very handy indeed.
For example, depending on individual circumstances £20 a month could buy a family around £220,000 worth of life cover.** This would be more than enough to cover the typical mortgage loan shown above, as well as a bit extra to help with any other outstanding debts.
There’s been more than enough coverage over the last few months about the European Union and what the UK’s exit will mean, much of which is still unknown. But the potential short term benefit of the interest rate cut could mean good news to many of your clients. Perhaps this could be the ideal time to revisit some of them, especially those on variable rates, to discuss their protection needs.
We offer a range of tools, from sales aids and approach letters, which are specifically aimed at mortgage clients as well as our of range calculators, including an affordability calculator.
This could be the ideal time to revisit certain mortgage clients to discuss their protection needs as they might find things a little bit easier with some extra cash in their back pocket.
*Source: Council for Mortgage Lenders
**Source: Royal London quotes, based on a healthy 34 year old woman or a healthy 39 year old man, both non-smokers.
Senior Marketing Consultant
Simon has worked within marketing for nearly 18 years. The last 14 of these has been specifically in the financial services sector working for a number of major brands including Scottish Provident, Bright Grey and since 2014 – Royal London.