Brokers have stated clients that have extended their mortgage terms to fit in with their personal budgetary requirements have been unable to extend their life assurance and critical illness cover linked to the mortgage.
Paul Hearnden, managing director of My Mortgage Direct, said: “There are lots of FTBs at the moment going onto repayment mortgages. However, to fit their budgets they are extending the terms of the deal beyond 25 years. But the downside of this is getting life and critical illness cover, as a lot of the major providers are refusing to go beyond the 25-year term. There has been quite a large pullout over the last 10 months or so with regards to life assurance going to offer over the 25-year term.”
He added the pricing generated by the extension was often thrown off course by lenders’ insurance companies refusals to offer increased terms, and suggested this may be due to the furore surrounding endowment policies. “Companies that have dealt with endowment issues in the past were happy to offer products with a 40-plus year life, but with the concerns of this market perhaps companies are not comfortable with offering products beyond a set term.”
He added with many major providers out of the equation it allowed other firms to charge a less competitive price for their services.
Another broker, who wished to remain anonymous, added: “This is a big consideration, because if the client needs to increase their term for their mortgage then the policy can jump considerably.”
