The difficulties facing first-time buyers are well known. That said, brokers have done a great job of helping this group get onto the housing ladder in recent years and we are seeing more first-timers take out mortgages than ever before.
In fact, recent figures from Halifax show that nearly half (46 per cent) of house purchases financed by a mortgage last year were made by first-time buyers.
However, while this is positive, the fact remains that many of these buyers fail to take out the insurance needed to protect themselves.
Unfortunately, many still seem to think that life insurance, critical illness cover and income protection are an unnecessary expense. In part, this may be because many first-timers are single and do not have any dependents, so it can be difficult for them to envisage who would be financially affected if the worst were to happen.
With this in mind, advisers should discuss protection with these clients differently from how they might with those further up the housing ladder.
According to Halifax, the average first housing deposit outside London now costs £32,321. Additionally, research from Which? shows that nearly a quarter (23 per cent) of first-time buyers have had to save for 10 years to get onto the ladder. By the time borrowers speak to a mortgage adviser, they may be more worried about how to afford furniture for their new home than how they will protect it.
So advisers must focus on the facts. When working with clients who are buying with a partner or friend, for example, advisers should make it clear that a lack of life insurance would have a detrimental knock-on effect on the other party if the worst were to happen, potentially leaving them forced to sell the property.
Conversely, if a buyer is purchasing the property alone, the focus should be on IP and CI cover.
It is also worth reminding buyers that long-term sickness is a problem not only for older people. Did you know that 29 per cent of claims made to Aviva last year were by policyholders aged under 40? Buyers of all ages need to be aware that they could be forced to sell their property if they became unable to repay their mortgage as a result of health problems.
We are seeing first-time buyers in London and the South-east especially reluctant to take out protection. In some cases, this is because larger employers in the capital offer these policies in salary packages. However, if a client chooses to rely on the protection provided by their employer, advisers should ensure they examine the small print and compare it to other policies available.
Advisers should also stay in close contact with these clients. If they change employer and suddenly find themselves without protection, advisers will be able to provide them with suitable cover.
There is no need for advisers to frighten first-time buyers intentionally but they need to ensure clients are taking on such a large financial commitment responsibly. Every pound lent must be protected, so any conversation around protection should come as naturally as discussions about Help to Buy Isas or 90 per cent mortgages.
Toni Smith is business operations director at First Complete and Pink