Industry Insights Series Q2 2020Jessica Amodio, Financial Adviser
There cannot be a person out there right now who has not worried, even the smallest bit, about COVID-19. Amongst the long list of worries surrounding this pandemic, there is the prospect of falling ill and not being able to provide for your family. For many, this problem has always been at the forefront of their mind, and why they have now opted to take out life insurance.
Life insurance pays your family an amount of money if you die while covered. When buying life insurance, the type, length, and cost of cover will depend on your personal circumstances. The cost of the cover will also depend on any current and/or previous health conditions. Previous health conditions disclosed at the time of commencing insurance are likely to result in premium increases and exclusions.
Life insurance generally covers death caused by any condition, so there is no life insurance specifically for COVID-19, or any other pandemics like it. Those already holding life insurance would be covered for death caused by COVID-19, as it would not have been an illness previously disclosed on commencement. However, there are some life insurance providers which may include or exclude certain illnesses or diseases. Therefore, it is worth checking what exactly is, and isn’t, covered when getting a quote.
Alongside life insurance, many people also have serious illness cover. This pays out a lump sum should the insured suffered from an illness or disease on a specified list. This list may vary depending on provider, with some covering more than others. Regardless of provider, you will probably find that COVID-19 is not on this list. The reason for this is that COVID-19 is not classed as a ‘serious illness’ in terms of their coverage. However, if you go on to develop a serious illness as a result of COVID-19, then this should be considered as a valid claim.
Going forward, if you do not already have life insurance then it is possible to take out a new policy to protect yourself. It is likely that along with the extensive health questionnaire you would have needed to complete beforehand, there will also be additional questions. These will be questions such as whether you have already tested positive for COVID-19, whether you have had symptoms or have been told to self-isolate. If you have, then an exclusion may be applied.
If you have any questions relating to life or serious illness cover, please do not hesitate to contact us so we can talk through your specific needs and circumstances.
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Industry Insights Series Q2 2020
Catherine Alexander, Mortgage Adviser
The outlook on the mortgage market has greatly improved throughout May and into June, with mortgage enquiries up 57% compared to April according to figures published by Experian. Levels are now back to those last seen in January which is good news for everyone involved.
COVID-19 has caused lots of movement in the market, with lenders initially pulling products in order to protect existing customers as we moved into lockdown. As time has gone on, lenders have come back into the market and have gradually increased their loan to value (LTV) limits which are now generally at 85-90% LTV. Most lending criteria remains unchanged with the majority of lenders accepting furlough payments as income for lending purposes. However, we have not yet seen the return of the higher LTV borrowing at 95% - which is a particularly important product area for first time buyers.
Borrowers looking for a high LTV mortgage should expect 95% LTV mortgage products to start returning to the market as there is more economic certainty. At the moment, it seems many providers have not returned to the market with these products because the number of applications has been so great, and with employee levels still low they need to focus their resources on processing current applications. In the meantime, first time buyers may choose to look at alternative options available to them such as new build properties where they can utilise the Help to Buy scheme or consider shared ownership.
Another piece of good news from the lenders is the increased use of technology that has been employed to keep their processes flowing. Many lenders have reduced or removed their telephone support services, particularly in terms of their communication with mortgage brokers, instead asking everyone to utilise alternative options which include secure messaging and web chat facilities. This increased digital journey is likely to be more prevalent in the industry moving forward, particularly where everyone has had time to evaluate how they would like to work in the future. This includes lenders carrying out more desktop valuations where possible which would speed up the mortgage application process in many cases.
Existing borrowers have also had the option of utilising a mortgage payment holiday which freezes their mortgage payment for 3 months. Although there is no doubt of the benefit to a significant number of borrowers, it is important to carefully consider the impact that this may have have on your current and future plans. Recent market research undertaken by specialist lender, Kensington, reported that around 25% of those who had taken a mortgage payment holiday did not fully understand how it worked and that taking one could impact underwriting decisions in the future.
So, what is predicted to be part of the new normal in terms of mortgages?
- More people will be reviewing what is important in terms of their homes and where they want to live.
- More people will also choose to work from home or work from home more often, reducing current face-to-face communication.
- The use of technology will become more widespread as new digital skills are acquired and systems improved to facilitate distance communication.
- New products launched to provide more variety in the market and a focus on customer segments e.g., COVID-19 heroes such as nurses, supermarket workers, etc.
- An increased awareness of protection products associated with taking out a mortgage e.g., life insurance, critical illness, income protection, etc.
We are happy to see the mortgage market heading in the right direction and look forward to some significant long-term changes, providing more options and opportunities to a greater number of people. If you have any questions regarding mortgages, associated protection products or any aspect of financial planning, please do not hesitate to contact us and we are always happy to talk through your specific needs and circumstances.
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Industry Insights Series Q2 2020
Joseph Middleton, Adviser
For many years ethical and sustainable investing was considered niche and high risk by the industry. Thus, many investors discounted this kind of investing for fear of losing their hard-earned savings. However nowadays there is a much larger choice of ethical and sustainable investment options and the risk is much lower. Indeed, sustainable funds in general performed much better than their relevant benchmarks during the recent COVID19 related market correction. So what has changed?
In recent years, people have become more and more aware of global warming and some of the unethical practices happening around the world. Due to this change in mood and evidence that the world needs to adapt, companies are starting to realise that in order to remain relevant and profitable they must take notice. What many fund managers are noticing, even when their fund is not strictly marketed as sustainable or ethical, is that companies that take these issues seriously generally perform better in the long term.
This can be linked to what we saw during the recent drop in asset prices due to the coronavirus. One of the only bright spots in markets was the resilience of sustainable funds generally. This can in part be attributed to the nature of the crisis – sustainable funds would not have exposure to oil, airlines and other areas of the market that have been hard hit due to lockdowns around the world. However, it is also because many ethical and sustainable companies have proactive managements. Having a good management team and systems in place has always been something fund managers look for when investing, as it is a key indication of a well-run business.
Of course, this does not mean that ethical and sustainable funds will always outperform, but this style of investing will continue to grow. At GDA we create bespoke portfolios designed for your personal circumstances and this includes if you are interested in sustainable and ethical investing.
More generally speaking it is clear that many companies and investors are taking more and more notice of wider issues and their impact on the world around us. This can only be positive news and the coronavirus crisis could be a further catalyst for change.
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