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Failing to talk protection with mortgage clients ‘irresponsible’

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  • 04/03/2015
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Failing to talk protection with mortgage clients ‘irresponsible’
Over three-quarters of Mortgage Solutions readers believe income protection advice should be mandatory in order to allow mortgage customers to proceed with an application, a recent poll shows.

According to the poll, just 22% of respondents did not think a discussion involving income protection was needed alongside mortgage advice.

In February, Pink Home Loans announced its advisers would introduce stress testing on every mortgage, requiring customers to provide their work contracts with any evidence of sick benefit entitlement and protection policies to allow its brokers to proceed with an application.

Pink said its mortgage customers would not be forced to take out protection if the stress test found they would not be able to meet their mortgage payments.

First Complete sales operations director Toni Smith said she encouraged any opportunity for brokers to discuss protection with their mortgage customers.

“I think it’s irresponsible not to discuss protection. Having said that, it should not be compulsory to sell protection unless the client needs it.”

Smith said she ‘fully endorsed’ Pink’s recent proposition. 

“I think it brings home to the customer the importance of being able to afford their mortgage and understanding the vulnerability of their overall financial position should anything happen to their employment once they’ve got a mortgage. The two things are absolutely integral, one without the other is irresponsible lending,” she added.

Dean Mason, practice principal, Masons Financial Planning, said that making income protection rules simpler would help to make the product more attractive.

“Many (especially the self-employed) understand the implications of losing income due to illness and injury and as long as the cost is reasonable to them, I believe this would be more palatable to the public than if similar rules were applied with life cover for example,” he said.

“The main issue here is underwriting of course; firstly income protection can be rated or have exclusions for relatively minor illnesses or medical issues.

Mason added that there were risks to forcing mortgage customers who needed income protection to take up the insurance.

“Secondly how would the regulator look if we are saying that those who’ve recently suffered from cancer or have had heart attacks, for example, can’t move or buy their first home because they can’t get income protection or the cost is prohibitive? Personally while it has the best intentions, I see this as a logistical, PR and regulatory minefield.”

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