After a difficult 2023 interest rates have begun easing, declining from a peak of 5.75% in August 2023 to a low of 4.75% in December 2024, and there appears more positivity in the UK housing market with reports of more landlords selling up and so opening fresh opportunities for owner occupiers.
With more landlords selling up, opportunities for first-time buyers are emerging.
But concerns remain about whether mortgage advisers are adequately protecting these vulnerable buyers and the overall effectiveness of the support and guidance they provide.
Health & Protection turned to protection brokers and providers to get a better grip on whether mortgage advisers are doing a good enough job in protecting people when making their big purchase, especially first-time buyers.
Are they adequately addressing these anxieties and making sure that first-time buyers understand their options and the importance of adequate protection?
Half don’t have life insurance
One issue is the alarming number of mortgage holders who do not have life insurance or critical illness.
Rose St Louis, protection director at Scottish Widows, says: “Research shows that half of those with a mortgage in the UK don’t have any form of life insurance and four in five are not covered for critical illness.
“This means people up and down the country are potentially exposed to financial shocks at the same time as they would be dealing with serious illness or death in the family.
“A mortgage is arguably the biggest debt a person will ever have.
“Arranging this without having a conversation about the benefits of protection insurance means a person could risk potential foreseeable harm.
“From a Consumer Duty perspective, we should utilise every opportunity to flag the risks to clients, talk them through options available and make sure they and their families have a financial safety net should the worst happen.”
First-time buyers
But the problem is most acute for first time buyers, Alan Waddington, distribution director at Cirencester Friendly notes.
“First time buyers have so much to take in when they purchase their new homes. Mortgage advisers are there to help them through the process and concentrate on the essentials,“ he says.
“It’s important they realise that protection is one of these essentials, a vital safety net to protect themselves and their family.
“It’s the perfect time to educate clients about how vital it can be both now and in the future.”
But he says younger people are more likely to understand the risks involved in buying a home.
Waddington says: “From our own research and that of other organisations, such as the Association of Mortgage Intermediaries, we know that Gen Z born between 1997 and 2012 and Millennials born between 1981 and 1996 are much more aware of the need for financial resilience than older generations.
“If mortgage advisers position protection correctly, they are likely to be met with a positive reception.“
Right conversation
Andy Walton, proposition director for protection at Mortgage Advice Bureau, agrees that mortgage advisers are crucial especially for first time buyers.
“Each and every mortgage customer should be having the right protection conversation, every single time without fail,” Walton says.
“Mortgage advisers play a critical role in helping first time buyers navigate the complex world of purchasing a new home.
“This includes helping them to understand not only the process, products, and services from a mortgage perspective, but also protection, insurance, and the impact of not being able to afford future mortgage repayments.
“If every first-time buyer in the UK in 2025 had the right conversation about protection with a mortgage adviser, then undoubtedly there would be a huge uplift in the amount of protection sold.“
Kesh Thukaram, co-founder of Best Insurance, also agrees the first time buyer market is critical.
“The first time buyer market is especially significant when it comes to income protection.
“This is because many first-time buyers pour everything they have into their first home, often borrowing from family and friends, leaving them with little to no savings, making it critical to safeguard against loss of income due to unforeseen circumstances.“
Strong demand
The demand from first time buyers remains positive however, David Hollingworth associate director of communications at L&C Mortgages notes.
“First time buyer demand has remained strong given the high cost of renting and if rate movement continues to be positive it should help to boost activity for homemovers as well,“ he says.
“That will be boosted in the early part of the year by the reversion of the stamp duty bandings from the extended nil rate band, affecting first time buyers and movers alike.
“Greater activity should help open-up more opportunities for advisers to talk protection and the purchase of a new home is a time when customers are more likely to take on board the benefit and need to take or review their cover.”
Far from good
But Joanna Streames, managing director at Velvet, is upfront in her opinion that the situation is far from good.
Streames says: “Mortgage advisers are nowhere near to doing enough, though I think they need support too.”
She highlights two recent cases in the past week, where a client had not been properly advised about private medical insurance (PMI) for their mortgages, resulting in their policies needing to be overhauled a short time afterwards.
“This week alone, I was speaking to two new clients about PMI who had taken out new mortgages in the past three months and been protected by their advisers to an extent,“ Streames says.
But Streames does not want to be over critical.
“I did not want to criticise the work of the previous advisers because we want to raise the reputation of the industry and it could appear as mud-slinging which wouldn’t help anyone and wouldn’t come across well,” she continues.
“However, these clients shouldn’t need an overhaul of their policies so soon.
“I don’t think it’s useful to play the blame game; I think mortgage advisers actually have it tough too.
“They are mortgage advisers and likely that is what they trained for and writing protection was an add on. I believe the industry, the governments have created the problem.“
Education for advisers
Streames advocates having greater education for advisers to help minimise these kinds of issues.
“Protection advisers don’t have to do any training or get qualifications and it’s not like it’s for life and death is it?….. Oh yes it is actually,“ she continues.
“Advisers will have been mortgage advisers most likely back when the prevailing culture was that protection was more of an add-on. It still is – though the FCA is trying to change that.
“The culture from where they first worked may have been that they didn’t ever get the training the subject matter deserves – so the gaps in knowledge are there from outset and then they just get bigger and bigger.
“How do they even know what they don’t know? How do they close those gaps?
“I launched a course last year for this type of thing after realising a lot of brokers have these gaps and are overwhelmed with paperwork so don’t have the time or space necessarily to figure it out, or the know-how of where to start.
“After being asked for help a lot, I had my lightbulb moment to run this yearly course and I must admit, at points I wanted to give up. I found it incredibly difficult to launch it purely because there is nothing like that out there and that just about says it all.“
Education for customers
But it is not only advisers who need education as according to Walton, customers also need to be educated.
“Customer education is vital to help them understand their risks, options, and possible solutions,“ he says.
“A mortgage adviser has a duty of care to act in their customer’s best interests and, under Consumer Duty, to help customers ‘avoid foreseeable harm’.
“There’s a responsibility from all perspectives to help customers understand the importance of protection and the solutions available to them.
“The question is, how good is our industry at doing this? The answer almost certainly being: it could do better.”
Walton emphasises that mortgage advisers cannot make a customer take out protection, however, they can make sure that the right conversation has taken place, every single time.
He believes there are two key areas for mortgage advisers to focus on.
“The first is time. It’s critical that every customer is allocated the right amount of time to ensure they fully understand the importance of protection,“ he says.
“The second is conversations about protection and educating customers in a way they can understand. That takes skill, practice, and ongoing development.
“Mortgage advisers should constantly review what they’re saying, how they’re saying it, and check their customers’ understanding.
“If either of the above cannot be reconciled, the mortgage adviser should refer the protection conversation to another adviser who has the time and skills to do so.”
The effect of Consumer Duty
Meanwhile, Customer Duty is already having a positive impact, according to Graham Singleton, CEO of National Friendly.
“The introduction of Consumer Duty has already started to reshape the way mortgage advisers approach client conversations,“ Singleton says.
“According to AMI’s 2024 Making Protection Personal report, 41% of advisers have increased the frequency of protection discussions, and nearly a third (31%) are now recommending a wider range of protection products.
“This shift is a positive step toward embedding protection as a core part of the home-buying process, rather than an afterthought.
“It’s vital that advisers help consumers understand how protection products can safeguard their investment and financial security in the face of life’s uncertainties.
“Mortgage advisers have a unique opportunity to not only meet their regulatory obligations but also to provide genuine value to their clients by taking a holistic approach.”
