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FOR ADVISERS ONLY

Is now a good time to be discussing protection?

Simon Halifax 17 August 2016
For a few years now mortgage advisers have probably be warning their clients that there’s only one direction that the interest rate is going and that’s up (well I know mine has)! However, the financial landscape changed when the UK voted to leave the European Union last month and it wasn’t surprising when the Bank of England reduced the interest rate to 0.25% the other week.

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*

A case study

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.

A conversation starter

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.

How we can help

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.

About the author

Simon Halifax

Senior Marketing Consultant

Simon joined the Royal London Marketing team in June 2014. He started his career in 1999 and has held various marketing roles within a number of financial services companies since then, covering products such as equity release, funeral plans, pensions and investments. However, since 2006 his primary focus has been within the protection industry having previously worked on the Scottish Provident and Bright Grey brands. Outside of work, Simon likes to travel as well as enjoying a range of sports including football and rugby.

This website is intended for financial advisers only and shouldn't be relied upon by any other person. If you are not an adviser please visit royallondon.com.

The Royal London Mutual Insurance Society Limited is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. The firm is on the Financial Services Register, registration number 117672. It provides life assurance and pensions. Registered in England and Wales number 99064. Registered office: 55 Gracechurch Street, London, EC3V 0RL.