New year resolution - have mortgage Plan B discussions

A further development for mortgagors living in Universal Credit areas is the additional introduction of a “no-earned income” requirement as a prerequisite to being able to access the new mortgage interest loan support being introduced. This significant reform gives good reason to discuss appropriate mortgage protection solution needs with clients. A recurring question, however, especially with advisers who don’t specialise in protection, is “how I start a protection discussion with clients?”. In my experience, one of the easiest ways to evidence the benefits of protection with clients is to link it to changes in financial circumstances, so in this case, a new loan or a mortgage commitment means that your clients financial commitments and resilience needs are both changing.

So, be aware of the SMI changes and explain them to clients, taking care to discuss the implication of the “no earned income“ requirement on joint mortgagors where both are earning. With mortgage clients, old and new, try asking them this: “Would you rather lose your home or lose your mortgage?” This certainly makes clients think. Our own research at Scottish Widows indicates that only a fifth of the UK's mortgage holders have a critical illness policy, leaving millions at risk of financial hardship or losing their home if they were to suffer a life changing and/or limiting health event. And this risk will shortly to be compounded by reform to the mortgage safety net. DWP mailings to existing SMI claimants is underway with early feedback suggesting little appeal for the new loan option.

Advisers can be reluctant to discuss financial protection issues but should take a lead from the health charities are who are increasingly raising public awareness of not just the incidence of life changing and/or limiting health events and their financial impacts. A report last year by Macmillan – “Cancer: Then and Now” - celebrates advances in cancer treatment and care, with people, on average, now twice as likely to survive at least 10 years after being diagnosed with cancer than they were at the start of the 1970s.The report speaks not only to the physical health impacts of cancer but the mental and financial health implications too.

Let’s discuss the need for a “Plan B”

In 2018 it will be more important that clients whose financial, mortgage and lifestyle needs are, or will be, underserved by working-age welfare reform have an appropriate financial resilience and protection back up “Plan B” in place. Welfare reform has not featured too highly on intermediaries' agenda for discussion with clients but now is the time as this issue is increasingly attracting media profile and debate. As evidenced by increasing protection sales in 2017, consumers are becoming increasingly aware of the need for this type of discussion.

For more information on Support for Mortgage Interest benefit and the Universal Credit Housing Element ( Owner/Occupiers) see www.turn2us.org.uk