Treat customers fairly with fixed price insurance deals

A recent article on fixed rate mortgages (Mortgage Strategy Online April 4) indicated that borrowers would opt for long-term deals.

The article says a study by Fairinvestment.co.uk has found that 37% of borrowers would opt for 25-year fixed rate mortgages and a further 28% would go for medium-term fixed rate products.

Some 25% say they would choose short-term fixed rate deals and just 6% say they wouldn’t opt for fixed rate products.

It goes on to say that long-term deals can provide more security by reducing the risks involved with mortgages, which is particularly important for fa¬milies with low incomes and for first-time buyers who often have little or no equity.

Yet buildings and contents insurance is sold on an annual basis. And if it is paid monthly, premiums are subject to 8% loading or more. As a result consumers who make claims find their premiums increase.

To make matters worse, insurers are putting up their rates every year to recover the first three-year fixed cost buildings and contents insurance policies to give home owners continuous cover.

Most brokers are only too aware that when finances get tight insurance payments are dropped first, leaving home owners and lenders exposed to un¬insured losses.

Brokers and lenders should seek to protect their borrowers from the in¬creasing costs of home ownership.

Logic says if customers want long-term fixed rate mortgages they’ll want fixed price insurance too.

Brokers need to take into account the demands and needs of their cus- tom¬ers by operating a proactive TCF policy.

It’s clear that fixed cost insurance adheres to TCF, especially in today’s un¬certain economic climate.

Stephen Clowes
Managing director
Millennium Insurance
By email