For most homeowners, the monthly mortgage payment is one of their biggest financial commitments. But what would happen if an unexpected illness or injury meant you couldn't work and your income suddenly dropped?
For most homeowners, the monthly mortgage payment is one of their biggest financial commitments. But what would happen if an unexpected illness or injury meant you couldn't work and your income suddenly dropped?
New research from MetLife UK highlights just how quickly a health shock can put mortgage payments under pressure. More than one in four (28%) homeowners surveyed said they had missed a mortgage payment because of illness or injury.
For some, it wasn't a one-off, 7% said that they had missed mortgage payments multiple times after being unable to work, demonstrating how quickly a temporary loss of income can develop into a wider financial problem.
What Happens If You Can't Work Because You're Ill or Injured?
It's easy to assume that savings, sick pay or help from family would provide a safety net if you were unable to work.
But the research suggests that many households could find their financial resilience tested much sooner than expected.
While 71% of mortgage holders said they had savings they could fall back on, those savings would last an average of just six months. More concerningly, one in five (20%) said they had no savings at all to rely on.
When savings aren't enough, people may need to turn elsewhere for support:
- 34% would turn to family
- 24% would rely on their partner
- 17% would rely on insurance
- 15% would consider taking on short-term debt
- 10% said they would have nobody to turn to
- 8% said they would simply miss their mortgage payments
These figures highlight an important question for homeowners: If your income stopped tomorrow, how long could you continue paying your mortgage?
Younger Mortgage Holders Appear Particularly Vulnerable
The research also highlights a significant difference among younger homeowners. Half (50%) of Gen Z mortgage holders surveyed said they had already missed mortgage payments because of illness or injury.
For people who have only recently bought their first home, there may be less opportunity to build substantial savings. At the same time, a new mortgage can represent a significant monthly commitment.
This is why considering what would happen if you were unable to work should be part of the wider conversation when arranging or reviewing a mortgage.
What Protection Could Help With Mortgage Payments?
There isn't one protection policy that is right for everyone. The appropriate solution depends on your circumstances, income, existing employee benefits, savings and the level of financial commitment you need to protect.
Depending on Your Circumstances, Options Could Include:
Income Protection- can provide a regular income if you're unable to work because of illness or injury, subject to the terms and conditions of the policy. Rather than being designed specifically around your mortgage, it can help replace part of your income, allowing you to continue meeting a range of essential household expenses.
Critical Illness Cover- can provide a lump sum if you're diagnosed with one of the specified critical illnesses covered by the policy. This could potentially be used towards mortgage payments or other financial commitments, depending on your circumstances and the policy terms.
Life Cover- is designed to provide a lump sum to your beneficiaries if you die during the policy term. For homeowners with financial dependants, this can form an important part of a wider protection plan.
Mortgage payment protection- There are also policies specifically designed to help with mortgage repayments if you're unable to work due to accident or illness. For example, MetLife's Mortgage Safe is designed to cover mortgage repayments for eligible customers who are unable to work because of an accident or illness, subject to the policy terms and conditions.
The important point is that protection isn't one-size-fits-all. The right type and level of cover will depend on your individual circumstances.
Don't Wait Until You Need It
One of the most important findings from the research is the element of hindsight. Nearly one in 10 (9%) respondents said they regretted not having protection after experiencing illness or loss of income, while 8% said they had assumed they were already protected when they weren't.
Protection is generally something that needs to be arranged before you need to make a claim. Waiting until you're already ill or unable to work may mean it's too late to arrange appropriate cover.
That's why it's worth considering your protection alongside your mortgage - not simply after something goes wrong.
How Financially Resilient Would Your Household Be?
- How long could my savings cover my mortgage and household bills?
- What sick pay would I receive from my employer?
- Would my partner or family be able to support me financially?
- Do I already have protection through work or personally?
- Would that cover be enough to maintain my current lifestyle and mortgage payments?
If you're unsure about the answers, it could be worth reviewing your protection arrangements.
At Crystal Clear Financial Planning, we can help you understand the different protection options available and consider how they could fit alongside your mortgage and wider financial circumstances.
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Your home may be repossessed if you do not keep up repayments on your mortgage. As with all insurance policies, conditions and exclusions will apply.
The cost of this insurance depends on several factors, such as your age, where you live and your occupation. As a result, the cost you will pay is based on your own circumstances.
