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Cautious welcome for ‘green shoots’ in mortgage market

October 2009 News

There are hopes that sales of individual protection products could recover, following news that mortgage approvals rose 81% in August, compared to the same month last year.

However, while the figures from the British Bankers’ Association (BBA) were welcomed as a sign of economic recovery, protection providers suggest mortgage intermediaries still need to look to alternative streams of income in order to survive.

“It’s a positive sign and a good opportunity for the protection industry, but it’s early days,” said Kevin Carr, director of protection development at PruProtect, who pointed out that the increase was generated from a low baseline.

In total, 38,095 mortgages were approved for house purchase in August, at an average value of £134,500, 3.2% higher than the average price a year ago.

“It means that people who were just making living from mortgages are still not able to yet,” said Phil Jeynes, key account manager at IFA support provider Direct Life & Pensions Services Ltd.

“The hope has been that brokers who weren’t previously selling protection much or at all have started to take it more seriously and treat protection as a priority because they have not been earning money elsewhere. The longer the downturn goes on the more competent they are likely to get at selling protection and to keep it up once the mortgage market goes up again.”

Both Carr and Jeynes agreed that the protection industry should learn lessons from the downturn and continue to help mortgage advisers to sell standalone protection.

“People still don’t have much spare cash to play with and so prioritising needs is very important, which all advisers should be doing for their clients,” said Carr. “And protection should be high on the list.”

Jeynes praised providers for offering support “really effectively” during the recession, describing online seminars as “fantastic”.

Experts who attended the recent Health Insurance Leadership Debate on protection, reported in this month’s issue (page 20), suggested that divorcing protection from mortgages could be a positive outcome for the protection market in the long-term.

“If you’re actually approaching people when they take out a mortgage, when they don’t actually have much money, it’s always going to be price-driven,” said Ben Heffer of industry analyst Defaqto. “If you could actually get it away from mortgages, you would have the opportunity to approach people when they had more disposable income, when they could afford to actually take out some income protection, for example, as opposed to just covering life with a bit of critical illness on the side.