"A significant minority are essentially in a mortgage-linked insurance trap - believing that switching away from their lender’s insurance will invalidate their mortgage."
A further 24% of borrowers who arranged their insurance with their lender think that switching their insurance to another provider will invalidate their mortgage.
12% say they felt under pressure to buy their lender’s home insurance while 6% said they were told by their mortgage provider that they had to.
According the research by Gocompare, 14% of all homeowners arranged their home insurance through their mortgage lender.
However when questioned why they had opted to buy their lender’s home insurance, Gocompare say they found a mixture of "misunderstanding, misplaced trust in their mortgage lender and consumer apathy".
14% thought buying their lender’s home insurance might help with their mortgage application, and nearly one in ten (9%) said they didn’t realise they could buy cover elsewhere.
22% said that their lender gave reassurances that the product was good value, but half simply assumed that their mortgage lender provided the best value cover for their home insurance.
72% hadn’t compared products and prices offered by other providers.
The survey also revealed that just over a third (34%) of homeowners who arranged cover through their lender didn’t check cover levels and excesses to make sure they were buying the right policy. According to statistics published earlier this year by the ABI, the main reasons for household insurance claims being rejected included the claim value being below the policy excess and the incident not being adequately covered by the policy.
Ben Wilson from Gocompare.com Home Insurance said: “We were shocked to find that so many people still think that their mortgage offer is conditional on buying their lender’s home insurance, and that a significant minority are essentially in a mortgage-linked insurance trap – believing that switching away from their lender’s insurance will invalidate their mortgage.
“We were also concerned that a handful of lenders could be exploiting their relationship with their customers by pushing them to buy their insurance cover."
