Those buying houses in the immediate future may already have saved up cash to pay for Stamp Duty. The unexpected saving of up to £1,750 would buy a lot of protection.
For example, a 30 year old non-smoking man could expect to pay around £22 a month over 25 years for £175,000 decreasing life cover plus £50,000 level life or earlier critical illness protection. A saving of £1,750 would cover the cost of his premiums for nearly seven years.
Equally, if he had been forced to pay Stamp Duty he might have had to put other purchases on his credit card. With an extra £1,750 to play with, he can leave the plastic in his wallet.
This leaves more cash to pay for protection, because if he’d put that £1,750 on an average credit card charging 14% APR and paid the minimum sum each month, he’d have been charged more than £2,200 in interest by the time he’d cleared the debt. That’s enough to fund protection cover for over eight years.
A similar state of affairs would apply if the consumer was planning to take out a personal loan to cover the cost of Stamp Duty. What he saves in interest alone would pay for his insurance. The Stamp Duty holiday has led to predictions that it could cause house prices to fall even further, with sellers whose homes are priced within shouting distance of the £175,000 threshold having to reduce prices to ensure buyers are willing to play ball.
For buyers looking at properties around this mark, if prices come down their monthly mortgage repayments will fall too. Once again, the savings could be used to cover their premiums.
Of course, the Stamp Duty freeze will only benefit those at the lower end of the property market. Many of these borrowers will be first-Iain mallon time buyers – arguably those most in need of cover.
Those buying alone need advice on income protection cover to make sure they can hang onto their investments if they become sick or unemployed.
Consumers buying because they have children to house need to look at protecting not only their income but also their lives to provide for their families if they die.
Every customer is different and will have varying methods to save money following the Stamp Duty freeze. But the change represents an opportunity for brokers to offer protection products alongside the mortgage business they write to customers who previously might have been unable to afford it.