What impact will mortgage rate rises have on life insurance cover?

2 Comments

1. 

   ANDY WOOLLON on 28th June 2021 at 10:38 am

   So setting the DTA interest rate at a default of 8%, whilst the actual interest rate might be 4% or less (fixed for 5 or 10 years) is best advice……?

   At best the client is paying for additional cover they don’t necessarily need……so surely it would be better to be able to amend the DTA IR to mirror the actual mortgage IR…….?

   Whilst there are two providers who offer a mortgage guarantee, the interest rate has to be set at 5% or 7% respectively, with a promise to pay any shortfall, only if a number of conditions are met (for example, not behind on mortgage repayments!).

   See full article here – https://www.zurichintermediary.co.uk/advice-matters/time-to-pay-an-interest-in-decreasing-term-rates

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   • 

     Adam Higgs on 1st July 2021 at 10:16 am

     Thanks for your comment Andy. In my humble opinion, your comment here highlights exactly why a mortgage guarantee is preferable. There are very few clients that will track the interest rate situation and immediately think “I need to update the interest rate on my mortgage cover”. Whilst it is great that Zurich offer the ability to change the interest rate mid term, in the real world very few people are actually going to do this. As such the lower the interest rate you select the higher the risk there is that the policy will not cover the full amount outstanding on the mortgage. Where an adviser is willing (and has the ability) to regularly track the interest rates and the interest rate set on every one of their clients’ policies, your point stands up, however I do not know any advisers that do this?

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