Survey shows almost half of Leinster mortgage holders felt pressure from banks to take out mortgage protection

A study has shown that more than half of mortgage holders in the Leinster region felt that their banks were not up front with them when it came to securing mortgage protection.

A new survey compiled by iReach on behalf of financial services company Low.ie has shown that 51% of mortgage holders in Leinster were not made aware of the fact that they could take out a mortgage protection policy with an independent financial broker instead of their bank. This means that they ran the risk of being charged a higher premium than those that could be obtained out in the wider market.

Additionally, 45% of mortgage holders in Leinster felt that they were pressured into taking out mortgage protection with the bank where they secured their mortgage.

Mortgage protection  is a life insurance policy that pays off your mortgage if you or your partner die during the term of the mortgage. It runs for the same length of time as your mortgage. So, if you take out a mortgage over 20 years, your mortgage protection insurance must also be in place for 20 years.  If you die during the term, your insurance company pays the policy benefit directly to your mortgage lender. Your lender uses the amount needed to pay off the mortgage and, if there is any left over, they will pass it to your estate. You can change insurer during the term of your mortgage if you find better value elsewhere.

76% of mortgage holders surveyed in the province outside of Dublin stated that they took out their mortgage protection with a bank which is a very high proportion of people who deal with their bank for mortgage protection, particularly when those banks do not give the consumer proper choice as they do not cover the whole market.

According to Peter O’Reilly of Low.ie, aside from Bank of Ireland, all banks in Ireland only deal with Irish Life for their mortgage protection, while Bank of Ireland solely use their wholly owned subsidiary, New Ireland. 70% of people surveyed in Leinster said that, at the time of taking out their mortgage protection with a bank, they were unaware that their bank was connected to just one life insurance company and that this dictated the mortgage protection policies that they were being offered.

People who have taken out mortgage protection can switch their cover to another provider at any time if they find that they can avail of a better deal elsewhere, and 84% of respondents in Leinster said that they would do so if it were cheaper, gave them sizable savings and ensured no dilution in cover.

Furthermore, 49% of respondents in Leinster who took out mortgage protection with their bank said that they were offered additional benefits such as serious illness cover even if they had shown no interest nor requested any information on these additional benefits for their mortgage protection cover.

Peter O’Reilly CEO of Low.ie, who commissioned the study, said;

“I find it disgraceful to see how much the banks are pulling the wool over people’s eyes, and the results of this survey clearly show us that the customer is not Number one in the banks eyes. Sadly, not only are Irish mortgage holders paying over the odds on their mortgage rates, but they are also doing likewise on their bank provided mortgage protection.”

“One would think that after their starring role in the recession, banks would strive to do right by their customers. When almost half of mortgage holders in Ireland state that they felt pressurised into taking out mortgage protection with the bank that issue them with their mortgage loan, it shows that little seems to have changed. Banks continue to focus more on their P& L rather than providing best advice to their customers.

“Some consumers are not shopping around out of inertia or choice but for many mortgage holders they are not even being given the option to shop around by their banks when they take out mortgage protection. For 51% of people in Leinster not to be made aware of the fact that they can take out mortgage protection with an independent financial broker only serves the interest of the bank and does not offer the customer a competitive option.

“Many people will automatically take out a mortgage protection policy with the bank where they have received their mortgage loan as they feel almost grateful to have been given a mortgage. They are under absolutely no obligation to do this and they should not be rushed into signing up for mortgage protection as not only is it not competitively priced, but they are also being limited to just one life insurance company.