New research from the Retirement & Investment group MetLife UK reveals that 26% of homeowners have missed a mortgage payment either because of an accident or illness that prevented them from working yet worryingly, that same research found that (47%) of respondents with a mortgage currently have no mortgage financial protection in place.
What else did MetLife’s research find?
The research from MetLife examines consumer views of the housing market, along with the experience of purchasing a property.
One in seven (14%) say they had missed mortgage payments more than once
34% of respondents said they have had to take four weeks or more off work due to an accident or illness.
Almost half (47%) said they needed financial support to help them meet their mortgage repayments
43% saying they are concerned about making their monthly mortgage repayments and 40% having no savings to fall back on
Why is it important to keep up with mortgage repayments?
Missing repayments on a mortgage can result in the lender repossessing the property to recover the loss and is obviously, something that homeowners and future homeowners want to avoid, not only to keep ownership of their property but to avoid credit issues including defaults and repossession on their credit reports.
Many lenders charge penalty fees for missed or late repayments too, which can accumulate and quickly spiral.
Thankfully, the number of homes repossessed each year is relatively low, though it’s important to stress the importance of having protection in place for eventualities that may be out of your control.
The pandemic, for example, saw an unprecedented amount of people take a mortgage repayment holiday due to a reduction of loss of income due to Coronavirus.
UK Finance says 2.75 million deferrals were granted up until the end of 2020, with a peak of 1.8 million in place in June 2020.
5% deposits help a new generation of new homeowners - but they need to get protection
Rich Horner, head of individual protection at MetLife, commented: “As ‘Generation Rent’ becomes ‘Generation Buy’, there is an increased need for financial protection and advisers have an invaluable role to play in providing impartial advice and identifying protection gaps.
He went on to say “Our research found that more than half of homeowners, and those buying a home, claimed to have mortgage protection in place, a much higher figure than the industry average.
This raises an interesting question around what constitutes mortgage protection and suggests more needs to be done to enhance understanding and awareness of what financial protection is available, and what is best suited to meet their needs. And as providers, we all have a role to play in that.”
How many properties are repossessed a year because of missed mortgage payments?
Repossessions are rare and even if you miss mortgage payments, your lender has a responsibility to work with you to find an affordable solution rather than resorting to repossessing to clear the debt.
Mortgage and repossession statistics provided by the Government show that repossessions are down year on year by 96%. That being said, it’s important to keep in mind that Coronavirus has had a significant impact on repossessions and many proceedings have been delayed or put on hold.
Claims, orders, warrants and repossessions from October-December 2020 all dropped by more than 96% in comparison to October-December 2019.
There were 255 possession claims
There were 29 mortgage orders for possession
45 warrants were issued
Repossessions (7) were down 99%
Do I need mortgage insurance?
It might feel uncomfortable to imagine a scenario in which you’d need mortgage protection or income insurance but a short conversation with an expert can quickly alleviate a task that simply isn’t worth putting off.
The reality is, falling ill or having an accident can happen to anyone and you may need a break from work to recover physically or mentally depending on the situation.
If that were to happen and you had no protection in place to cover your outgoings such as your mortgage, the added stress of being behind on repayments could even contribute towards a longer recovery period according to a report which has meta-analysed more than 300 articles on Psychological Stress and the Human Immune System.
Chronic stress brought on by unemployment, caregiving and living with a handicap can negatively affect sleep patterns, contributing to the bodies inability to release proteins and antibodies that fight infection and promote healing.
You might not ever need mortgage protection but in the rare event that you do, having it in place and knowing exactly how much you’ll receive and when can prevent a lot of unnecessary financial hardship for you and your family.
What types of mortgage insurances are there?
MetLife UKs research also found that three in five of the respondents (61%) took four weeks or more off work to care for themselves, while 19% cared for their partner and the same number (19%) to care for a family member. 17% took time off to care for their child(ren) too.
There are clearly many different eventualities that can affect a borrower’s ability to repay their mortgage and subsequently, there is a range of insurance products that could be available to you including:
Income protection (To help cover your mortgage payments if you are unable to work due to an accident, sickness or redundancy)
Critical illness cover (To cover the cost of your mortgage or private healthcare in the event that you are diagnosed with a long-term illness or disease)
Life insurance (This covers the cost of your mortgage in the event that you pass away)
Buildings Insurance (To cover the rebuild costs if something happens to your home)
One in seven (14%) admitted to regretting not having any mortgage protection in place
If you fall ill or have an accident that prevents you from paying your mortgage, whether that be for a residential property, a buy-to-let investment or a business premises, knowing that you’re covered can prevent stress and help you to avoid accumulating mortgage debt and falling into repossession proceedings.
Our insurance brokers look at your circumstances and identify the areas that could present a risk to you.
They’ll only ever recommend affordable insurance products that provide you with enough of a financial safety net to cover your outgoings.
A short conversation now can provide a lifetime of assurance so call or make an enquiry today to tick it off the list and get the protection you need.