"The temptation to cancel direct debits for protection policies will, understandably, be strong. However, our Affordability Index shows the need for protection advice is greater now than ever."
- John Scrivens, Head of Sales at Stonebridge
Based on Office for National Statistics (ONS) gross wage data (not including bonuses), Bank of England loan rate data, and its internal loan data, Stonebridge has confirmed that mortgage repayments accounted for 40.1% of the average homeowner’s salary in September 2024.
Whilst affordability had improved slightly (from 40.6% in August), mortgage repayments continue to account for higher proportions of homeowners’ salaries than they had done historically. The mortgage & protection network warns this figure is due to rising house prices and borrower costs; "rising house prices [are] effectively cancelling out any benefits gained from the gradual reduction in mortgage rates witnessed over the past twelve months."
The average rate on newly drawn mortgages fell from 4.86% to 4.78% between August & September, according to the Bank of England. However, Stonebridge’s internal data shows the average loan size rose to a 27-month high of £198,383 that month. Rising house prices have resulted in marginal financial relief for homeowners.
"With house prices still rising and mortgage rates elevated, homeowners are now spending more than two-fifths of their salary on mortgage repayments – well above the historical average. This highlights that the cost-of-living squeeze is far from over for millions of households," highlighted Rob Clifford, CEO of Stonebridge.
Considering these findings from a protection perspective, John Scrivens, Head of Sales at Stonebridge, told Protection Reporter that the pandemic brought about a marked change in behaviour. "In the harshest way possible, it threw into stark relief the reality that we’re all human, so we’ve seen a growing acceptance of the need for protection, especially amongst younger generations," he explained.
John said: "People still don’t want to be sold to, but they are receptive to being educated on their needs & options. And as a result, protection sales are increasing. That said, the net effect of consistently high interest rates and rising loan sizes means borrowing is more costly and there aren’t many people who won’t be feeling the pinch right now.
"The temptation to cancel direct debits for protection policies will, understandably, be strong. However, our Affordability Index shows the need for protection advice is greater now than ever. If reducing costs is your customers’ focus, providing a holistic view of their needs and circumstances will enable you to advise on the many levers to pull to bring their budget back under control – without compromising their protection.
"As we know, self-serving at times like this is a false economy, as only an adviser will be able to write a policy in trust, or ensure they have the appropriate cover in place. Advice continues to be all about tailoring solutions across borrowing and protection to the customer's individual needs," he concluded.
