Home buyers in the UK are paying over the odds on their home insurance by opting for products provided by their mortgage company, according to new research.
Around 17% of mortgage holders could be paying £66 more than they need and with around 7.8 million mortgaged households in the UK this equates to overpayments of nearly £90 million by consumers across the country.
The survey commissioned by Compare the Market online comparison site found people believe that their mortgage provider is an easy option with 44% going with their options. But the research also shows that 11% of customers who took out home insurance through their mortgage provider felt pressured to do so to secure a mortgage.
Buildings insurance is compulsory when purchasing a freehold property with a mortgage and covers the building itself should it be destroyed or damaged, for example by fire or flood. However, a large portion of consumers taking out a mortgage admit to simply taking the offer provided to them by their bank without seeing whether there are more attractive options available on the market.
However, customers appear to be getting savvier as 52% said they did shop around for a better deal on their home insurance within the last year and only 6% said they had never researched alternative providers.
‘When you consider the huge outlay required when buying a house, it is very easy to ignore the potential savings from shopping around for a home insurance policy,’ said Gemma Sonfield, the site’s head of home insurance.
‘However, as the statistics show, almost £90 million is being overpaid unnecessarily by taking the default option of home insurance via their bank. Perhaps the most concerning finding in our research is that more than one in ten people felt pressured to take the home insurance policy in order to secure the mortgage and that the same number didn’t even know that shopping around was a possibility,’ she pointed out.
‘If some people feel forced to take what can be a more expensive policy, banks need to evaluate how they communicate with their customers,’ she added.
