Protection gets sold when times are tough but gets forgotten when the good times roll but let’s not make that mistake this time round
The news reports tell us mortgage sales are once again on the rise, especially for firs-time buyers, which is excellent news.
Lending to first-time buyers in June was up 30 per cent year-on-year and the Council of Mortgage Lenders says the second quarter of this year was the highest quarterly total for lending since 2007.
First-time buyers also continued to increase the amount they borrowed – with an average loan size of £117,000 in June up from £112,500 in May. As a result of this there has been a stronger growth in the value of loans advanced to first-time buyers which totaled £3.5bn – an increase of 9 per cent in value compared to May and 40 per cent on June last year.
The Council of Mortgage Lenders says that this increase in first-time buyer, along with growth in lending to home movers, has resulted in a jump in total house purchase lending.
Some reports, however, also suggest that with mortgages making a welcome return, protection sales will once again be forgotten. After all, that is the usual trend: Sell protection when times are tough and forget about it when times are good.
But isn’t that a bit short sighted?
People need protection, premiums are competitive, the sale is closely related to the mortgage, mortgage advisers already have most of the relevant client information, commission still exists and the economic climate is tough. It may not be the exciting part of the sale, but it is the bread and butter income that can make the difference between a firm staying in business or not – as well as being important for the customer let’s not forget.
There is also the argument that protection sales compliment mortgage sales well and it would be counter-productive to dismiss protection just because mortgage sales are increasing.
Ultimately there is no way of knowing if things will ever get back to how they were and the firms that prosper most will surely be those who, having got into the habit of selling protection, continue to do so.