"We're going to see more vulnerable customers in the next 12-18 months"

Data shows 48% of UK homeowners are worried

"We're going to see more vulnerable customers in the next 12-18 months"

The need for mortgage protection for first-time buyers (FTBs) will become more important in the next 12-18 months because of the increased chance of short-term income shocks, according to head of individual protection at the MetLife, Rich Horner (pictured).

Speaking to Mortgage Introducer shortly after chancellor Kwasi Kwarteng announced a cut in stamp duty aimed at boosting demand for property, Horner warned that FTBs would nonetheless face higher mortgage payments.

“If first time buyers can get on the housing ladder, there’s good affordability checks - we know they can afford it - but they’re going to be signing up to higher and higher level mortgages,” he said.

“The need for protection for customers, particularly first-time buyers, which is one of our target markets, is very important because the chance of short-term income shocks in the next 12 months to 18 months feels incredibly high to me. The importance of mortgage protection…it’s always important, (but) it feels like it’s never been higher.”

The cut in stamp duty means FTBs will get more support to purchase a home as the threshold has been raised from £300,000 to £425,000. The nil rate band will also be doubled from £125,000 to £250,000 for other homebuyers, a move the government says will help 200,000 more people to buy a home every year.

Read more: UK government cuts stamp duty tax

However, critics have said the cut in stamp duty will only cause house prices to rise even further, partly because housing stock remains low.

It should also be noted that the Bank of England’s decision to raise the base interest rate a day earlier by 0.5 percentage points to 2.25% is unlikely to be the last one this year, despite a likely recession.

Horner said both the market and the public would need time to assimilate the impact of the BoE’s rate rise and the government’s new measures.

“It’s just going to be really hard for the customers to know what to do. I think it’s going to take a while just for us to really chew over the announcements and figure out what it means for everyone,” he conceded.

Evidence nonetheless suggests homeowners are becoming increasingly concerned about the cost-of-living crisis.

Last week, MetLife released the findings of a new study showing that 48% of UK homeowners are now worried about mortgage payments.

Worryingly, 42% said they did not have any savings to fall back on should they find themselves unable to work, while 61% of 18- to 24-year-olds admitted they would only be able to cover their mortgage repayments for up to two months if they also found themselves without work.

Horner said: “Homeowners are stuck between a rock and a hard place right now. Mortgages are one of the biggest financial commitments people make and yet, our research revealed a worrying 46% of homeowners have no mortgage protection whatsoever, at a time when so many are highly concerned about their ability to make necessary repayments.”

The research found that the perception of price and affordability were key barriers to mortgage protection take up, an issue Horner admitted was a problem.

“It’s probably not as expensive as customers perceive to protect their mortgage, and some protection is better than not (having any). We’ve got a banner on our policy - there is an option where you can get protection for accident only, and because it’s accident only it’s not underwritten and it’s very cost effective,” he pointed out.

Read more: Which industry’s employees struggle the most with mortgage repayments?

Either way, he stressed the importance of having protection.

Horner said the barriers the borrower often puts up can be overcome by simplifying underwriting, providing choices for the customer and getting across the point that “there isn’t a perfect product that fits every customer”.

He said: “That’s where an advisor can look at all the options that are available and make the most relevant recommendation. When people prioritise their mortgage, they’ll prioritise their protection around the mortgage in their life. It’s early days, but we are seeing some signs that show that could be happening.”

If there has been shift in perception, it could prove crucial all round, as Horner concluded: “The FCA (Financial Conduct Authority) talks a lot about vulnerable customers, and rightly so. We’re going to see more vulnerable customers, so how we support them as an industry and give them access to protection is going to be really important.”