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Millions caught in home insurance mortgage trap

More than 1.6m homeowners have bought home insurance from their mortgage lender and many mistakenly believe they cannot switch for a better deal.

Some 14% of homeowners arranged their home insurance through their lender, according to a new survey from Gocompare.com Home Insurance.

Of these, 30% believe their home has to be insured with their mortgage lender as a condition of the loan.


Worryingly, 12% say they felt under pressure to buy their lender’s home insurance while 6% said their mortgage provider said they had to.

Nearly a quarter believe that switching away from their lender’s insurance will invalidate their mortgage.

When questioned why they had opted to buy their lender’s home insurance, the survey revealed a mixture of misunderstanding, misplaced trust in their mortgage lender and consumer apathy.

The survey also revealed that just over a third of homeowners who arranged cover through their lender didn’t check cover levels and excesses to make sure they were buying the right policy. 

Ben Wilson from Gocompare.com Home Insurance said: “We were shocked to find that so many people still think that their mortgage offer is conditional on buying their lender’s home insurance, and that a significant minority are essentially in a mortgage-linked insurance trap – believing that switching away from their lender’s insurance will invalidate their mortgage.  

“We were also concerned that a handful of lenders could be exploiting their relationship with their customers by pushing them to buy their insurance cover.”


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