In the eyes of the team at David Williams IFA Mortgage & Insurance Services, based in Northampton, a single customer paying the higher standard variable rate (SVR) of their existing mortgage lender unnecessarily is one customer too many. Unfortunately, it is a scenario that is all too common.
The SVR is the go-to rate offered by a lender which a mortgage defaults to at the end of the initial fixed, tracker or discounted deal. Generally, it comes about through a lack of action when a customer is prompted, or the customer being unaware of the process. Whilst in some cases at higher loan to values this can lead to a reduction in the interest rate charged, in the majority it leads to an increased rate and higher subsequent monthly repayments. Director of David Williams IFA Mortgage & Insurance Services, Chris Peck, said: “With lenders’ SVRs often being between 3.5% to 4.5% and the cheapest fixed rates available on the market being below 1.5%, many borrowers may as well be setting their money alight; that would at least keep them warm this winter!”
Indeed, based on the average UK balance of £137,934* a mortgage charged at 3.5% would cost a whopping £2,645 more than one charged at 1.5% over the course of a year.
David Williams IFA Mortgage & Insurance Services use their expert knowledge of the market and status as an independent mortgage broker to access thousands of deals through a plethora of different banks and building societies. They will not only check what is available for a customer through their current lender but also compare them with the offerings of other lenders for their existing and growing client base.
“Gone are the days where you should rely on your existing lender to offer you the best deal possible. Some even offer higher rates than they would offer new customers. We recommend reviewing a mortgage deal four to six months before it comes to an end to offer plenty of time to secure the best rate possible,” said mortgage adviser, Josh Evans.
“An employee of a bank can only offer deals from their own range, and so more and more people are forming relationships with a broker local to them. At David Williams IFA Mortgage & Insurance Services, we not only compare interest rates between products, but also take the extra step of calculating the amount of capital remaining after an initial deal to ensure we are truly recommending the most viable option. Overall, our aim is to create a full understanding of a customer’s situation and partner this with our intimate knowledge of lender’s criteria; to help not just in one instance, but for every mortgage need that comes up in their lives. We have a specialist team that also deals with insurance, therefore we can save customers money and the time and hassle of them having to provide their personal information again and again.”
Have you reviewed your protection?
While this might appear to be a simple question it can hold a whole host of complexities, which you should seek advice on. A review of your policies is important to ensure that you and your family are correctly protected, whether that be with life insurance, critical illness or income protection. It may be that you have taken a new mortgage, your borrowing has increased or perhaps an addition to the family, a change in job or divorce? In all scenarios, this should prompt a review.
Ordinarily, financial advisers will review protection policies every two to four years. A common perception among consumers when reviewing insurance policies is an expectation of an increase in their monthly spend, however this is not always the case.
Martin Kelly, Mortgage & Protection Adviser at David Williams IFA Mortgage & Insurance Services, said: “Maintaining regular reviews of your insurance policies is an absolute necessity. This is an ever-changing industry with new and improved contracts being brought to the market to coincide with developments in medical practice. Providers are in constant competition with one another to be most comprehensive; this leads to a steady introduction of new and improved terms and conditions leaving historic policies out of date.
“We compare critical illness contracts with the industry recognised comparison tool, CI Expert. This handy tool features all new and historic policies which have been released in the UK market via a scoring system. CI Expert is heavily under-utilised among many financial advisers, but as an adviser, it is important for me to highlight this as many policies available today give the customer a significantly better chance of a successful claim.”
Have you placed your insurance in trust?
Another crucial reason to review your protection policies is to ensure your plans are held in trust. Not only does it allow you to nominate someone to oversee your affairs and avoid probate delays, but it also removes the proceeds from your estate. In doing so, your insurance does not contribute towards a potential inheritance tax liability. Insurance policies are not usually subject to tax, however, if your estate is valued at higher than the nil rate band for IHT purposes, your beneficiaries may be subject to a 40% tax bill.
Have you taken advice on your protection?
Speaking with an adviser will not only give you the peace of mind that your plan is suitable for your needs, but also ensure it provides comprehensive cover. Too often we come across consumers who have gone direct to an insurer or a non-advisory third party firm, and have subsequently encountered difficulties at claim stage. Non-advised firms and insurance companies are unable to provide advice to which plan is more suitable or whether a health concern needs to be disclosed, so it falls to the client’s judgement.
Carly Buck at David Williams IFA Mortgage & Insurance Services has a perfect example of this.
“I arranged a critical illness policy for a client who was purchasing his first home. Unfortunately, he was diagnosed with leukaemia only a year after the policy was put into force. Upon hearing my client was unwell, I took over the claim as he was not in a position to be able to process this himself. The insurance company were only prepared to pay half of the sum assured. However, on uncovering an error on the insurance company’s part at the time of application, I was able to take this case to the financial ombudsman and fight for the client’s right to have the full claim awarded. The financial ombudsman concluded in my client’s favour and awarded the full claim plus compensation.”
Without this client having an adviser who provided the client with the knowledge, skills and dedication to their case, this could have been a very different story.
Carly Buck was commended in the Cover Excellence Awards 2019 for best customer service in her handling of this claim.
David Williams IFA Mortgage & Insurance Services are committed to placing consumers with the right policy for them and their family. Have you taken out a plan without advice? Is your insurance in trust? Or have you simply not reviewed your plan recently? The team of experts are always on hand to help.
*Statistics from The Money Charity