More than £400 billion of UK mortgages are not protected – is yours?

Your mortgage is likely to be the biggest financial commitment you ever make. And, when you use your home as security for a loan, failing to keep up repayments can have devastating consequences for you and your family.

So, ensuring that your mortgage is protected should anything happen to you or your partner is a crucial financial planning step.

Despite this, new research published by COVER magazine has revealed that more than £400 billion of UK mortgages are not protected – with borrowers in London and the south-east the most likely to have an unprotected loan.

Read on to find out more about these worrying statistics, and for all the reasons you should protect your mortgage with low-cost and appropriate protection.

Brits leave more than £400 billion of mortgages unprotected

According to Statista, in the autumn of 2022 the average new mortgage granted to a borrower in the UK broke the £200,000 barrier.

If you are taking out a six- or even seven-figure loan to buy or refinance your home, you want to ensure that you or your family can continue to pay the mortgage if the unexpected happens. Life insurance is typically the most appropriate and cost-effective way to do this.

Despite this, research has revealed that around £433 billion of mortgage debt is not covered by a life insurance policy in Great Britain.

The research, published by COVER magazine, calculated the mortgage debt estimate for each region of England, along with Wales and Scotland, that is not protected by life insurance.

The study found that London was the area with the largest mortgage cover gap in England (the potential liability for homeowners should their partner die unexpectedly) at £86.4 billion.

This is followed by the south-east (£82 billion) and the east of England (£50.7 billion), while the north-east was at the lower end of the mortgage cover gap at £10.9 billion. The cover gap was £27.9 billion in Scotland and £16.1 billion in Wales.

Beth Tait from the firm who commissioned the research said: “Unexpected death is not something we want to think about, but it's the responsible thing to do to avoid leaving loved ones in the lurch, especially given excess mortality rates post-Covid.”

Protecting your mortgage can give you real peace of mind

As well as likely being the largest financial commitment you ever make, your mortgage may also represent your biggest monthly outgoing.

So, whenever you take out new borrowing, or remortgage your home, you should think carefully about how you or your loved ones would be able to maintain or repay the loan should the unexpected happen.

Think about questions such as:

• If you were off work for an extended period, would you be able to pay your mortgage and bills?
• If your spouse or partner was sick or in hospital, would you be able to pay your mortgage? Would you face additional expenses such as childcare costs?
• If you were to die unexpectedly, could your family afford to remain in your home? If not, what would happen to them?
• If your spouse or partner died, would you be able to afford your mortgage repayments and other commitments on one income?
• If you or your partner were diagnosed with a serious illness, would you be able to maintain your monthly outgoings – especially if you had to take an extended period off work?

It’s easy to see how the answer to many of these questions could be “no” and, consequently, why you may need to act.

If you were to die prematurely you could leave your family with a debt of hundreds of thousands of pounds. They may not be able to afford the repayments and have to sell the family home. This could also affect your family’s quality of life or impact on the ambitions you have for your children.

So, if you owe some of the £433 billion of unprotected mortgage debt in Britain, now is the time to think carefully.

Mortgage protection can cost just a few pounds a month

If you want to ensure your loved ones can repay your mortgage if the worst happens, or be able to maintain the monthly repayments, it’s time to take out protection.

Life insurance starts from just a few pounds a month, meaning you can ensure your family receive a tax-free lump sum that may enable them to repay your outstanding mortgage debt if you were to die unexpectedly.

We will scour the market for you to find the most cost-effective life insurance cover for your needs. Get an online life insurance quote now.

5 types of mortgage protection that could give you peace of mind

• Level term insurance

Perhaps the simplest form of life insurance, level term insurance pays out a fixed amount if you die within a specific term. For example, you might take out £200,000 of cover to protect your mortgage over the term of 25 years.

If you die within the term, the policy will pay out the sum assured. Your beneficiaries can use this money to repay any outstanding mortgage, or to replace your income.

Get a life insurance quote now.

• Decreasing term insurance

Most commonly used alongside a repayment (or “capital and interest”) mortgage, decreasing term insurance can be a very cost-effective way of protecting your mortgage.

With this type of cover, the amount of life insurance reduces in line with your outstanding mortgage. It is designed to ensure that, if you die within the term, a lump sum will be available that will let your loved ones repay any outstanding mortgage balance.

• Family income benefit

If you want to ensure that your loved ones continue to receive an income if you’re no longer around, family income benefit can be a cost-effective way to do this.

Instead of paying out a lump sum, family income benefit pays a recurring income every month from your death to the end of the policy. 

It gives you the peace of mind that your family will continue to receive a regular income if you die prematurely. They can use this to pay the mortgage and associated household bills, enabling them to maintain their standard of living. It’s particularly useful if you have younger children.

• Critical Illness cover

While the above three types of protection pay out on death, Critical Illness cover pays a tax-free lump sum if you’re diagnosed with a serious medical condition, such as cancer or multiple sclerosis, or if you have a heart attack or stroke.

It provides financial support at a time where you may need to take an extended period off work to recuperate, meaning you don’t have to worry about your finances at an already stressful time.

You can either take Critical Illness cover as a stand-alone policy, or many providers will let you incorporate this cover alongside your life insurance.

Get a Critical Illness cover quote online now.

• Income protection

As the name suggests, income protection pays a regular income – normally up to around 60% of your salary – if you’re unable to work due to accident, injury, or illness.

It provides vital support to enable you to maintain your regular commitments until you’re well enough to return to work.

We’ll help you find the right cover at the right price

As protection experts, we can help you to find the right life insurance or Critical Illness cover for you. We’ll search dozens of the UK’s leading insurers to find the lowest premiums, and the cover that’s most suitable for your needs.

Get a life insurance quote now.