The outlook remains unstable in the housing market.
Tighter lending criteria, an unstable job market and proposed EU regulation, which could restrict the industry even further when it comes into effect later this year, are all stemming the flow of homeowners selling.
This backdrop not only hinders first-time buyers, but it also restricts existing homeowners who are struggling to pay their mortgages and are looking to sell and downsize to reduce household outgoings.
In 2009, the government launched a scheme to support UK residents in this exact predicament.
The Mortgage Rescue Scheme was intended to help 6,000 households struggling to pay their mortgage: in its first two years it has helped just 2,600.
Not only that, but the scheme is over budget, with the average cost of each rescue reaching £93,000 compared to an expected cost of £34,000 – a burden the government can ill afford as it looks to cut costs across the board.
For those who have lost their homes too, the future looks bleak.
Housing benefit caps introduced this year mean that Local Housing Authority weekly rates cannot exceed £250 for a one-bedroom property, £290 for two bedrooms, £340 for three bedrooms or £400 for four bedrooms.
This will have a huge impact on those who live in areas where rents remain stubbornly high, particularly given that rental rates look set to rise as demand increases from those who cannot afford to buy.
Given this situation, it is hugely concerning that consumers still believe they would not need to worry if they lost their income due to unemployment or sickness.
In a recent survey, we found that a third of consumers thought they would rely on the government if their income suddenly stopped.
In light of the ongoing austerity measures, this may not be the best option as the government seeks to reduce the UK’s deficit.
With less support from the government, consumers need to ensure they have a financial contingency plan in place in case the worst happened.
In the same survey, only 11% of people claimed to have mortgage payment protection insurance and a mere 4% had income insurance; worrying figures given the current economic market.
Yet, almost half said that they would not be able to last longer than three months on their savings alone.
This is pretty startling given the fact that the current jobseekers’ allowance would only provide £270 a month, highlighting a real requirement for adequate protection.
However, consumers’ perception and awareness of the benefits that creditor insurance can deliver both need improving.
In comparison to the failed government’s Mortgage Rescue Scheme, mortgage payment protection provides a real lifeline for UK households.
For example, Paymentshield helped more than 22,000 families stay in their homes over the last two years.
This dramatic difference in comparison to the government scheme demonstrates how protection products can play an effective solution for UK homeowners, rather than relying on government initiatives.
With our strained circumstances set to continue, mortgage payers need to be realistic about their options, ensuring they have a contingency plan in place to support them if their income suddenly stopped due to illness or redundancy.
In the current economic backdrop, consumers need quality advice more than ever.
Many clients will focus on today, but it is vital for advisers to highlight the possible bumps in the road and provide an appropriate solution.
Identifying possible financial scenarios and discussing what provisions the customer has in place will grab their attention and offers an ideal opportunity to discuss the benefits of protection products.
In addition, many consumers are unsure about creditor insurance. Brokers are on the frontline to break down misguided perceptions and provide the right insurance to complement any changes to individual circumstances.
At this point, brokers can tailor the cover to suit the needs of a client, taking into account all aspects of the financial situation, including the level of savings. This bespoke, expert advice will provide the reassurance consumers need.
This process not only increases the possible earning potential for intermediaries, but it builds an ongoing relationship with the client.
This is key to forming a strong, loyal customer base.
Brokers should seize this opportunity to turn the negative outlook for the housing market into a real positive for clients and their business.
