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If your mortgage repayments have increased, you should review your financial protection

April 29, 2024

Over the last year, interest rates have steadily increased. If you have a mortgage, it may have affected your repayments, or could in the future. So, does your financial protection still provide the cover you need?

The Bank of England has increased its base interest rate to tackle high inflation, which has led to a rise in the cost of borrowing. If you have a loan with a variable interest rate, your repayments may have already increased.

As your mortgage is often the largest loan you take out, even a seemingly small change to the interest rate could mean your expenses are much higher. If you have a repayment mortgage of £240,000 over 25 years:

  • An interest rate of 3% would lead to a monthly repayment of £1,138
  • In comparison, repayments would rise to £1,404 if the interest rate increased to 5%.

So, it can have a significant effect on your budget and your ability to overcome financial shocks.

As a result, if you already have financial protection in place, it may no longer provide the security you want. 

Income protection could provide financial support when you need it most

If your income stopped due to an illness or accident, what financial commitments would you need to meet? Regularly reviewing your outgoings could help you identify these and fill a gap if it’s needed. 

Income protection could provide an income if you’re unable to work due to an accident or illness. It will typically provide you with a proportion of your usual salary, normally around 60%, until you return to work, retire, or the policy term ends. This could help you cover regular expenses and means you don’t need to worry about short-term finances.

According to the Association of British Insurers, the average income protection payout in 2021 was £23,380. 

Just 12 months ago, your income protection may have been enough to maintain your lifestyle, but would that still be the case now?

Your mortgage repayments could be significantly higher than they were previously. Inflation has led to other costs soaring too, particularly energy and groceries. 

While you may be confident about your ability to weather a financial shock, rising outgoings could mean you’re unprepared and face a shortfall if you ever need to rely on financial protection.

So, you should check your financial protection would still provide the income you need to be financially secure. 

If you don’t have financial protection already in place, reviewing how you’d cope if you suffered a financial shock can be valuable.

Financial protection can give you peace of mind that, should something happen, you’ll have money to fall back on. While you would need to make paying premiums part of your budget, they may not be as high as you think. 

2 more things to check to create a financial safety net you can rely on

1. Your emergency fund

An emergency fund can provide you with a safety net to cover short-term outgoings. 

The amount you should have in your emergency fund will depend on your goals. Having enough to cover three months of expenses is a common target. 

Again, as inflation could mean your outgoings are higher, you may want to increase your cash reserves. 

2. Your employer’s sick pay policy

It’s worth looking at your employer’s sick pay policy too. In some cases, they will pay your full income or a proportion of it for a defined period. This way, you wouldn’t need to rely on Statutory Sick Pay, which is unlikely to cover your essential expenses. 

If your employer does provide sick pay, you could opt for financial protection that has a longer deferment period, which could lower your premiums. 

Contact us to talk about your financial safety net

Having a financial safety net that reflects your regular outgoings is essential and can give you confidence about the future. If you have any questions about the steps you could take to improve your financial security, please contact us.

Please note:

This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

Your home may be repossessed if you do not keep up repayments on a mortgage or other loans secured on it.

What our clients say

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I would highly recommend Darius and John. I’ve used a financial adviser previously and could never get in contact with them when I needed their help. Stratton Wealth Management have been excellent from the start. They are always available to talk, and they also don’t talk in financial jargon!

Dave Rigby -

A client since 2015

Having recently transferred my financial management to Stratton Wealth Management, I have been extremely impressed with the highly professional service I have received. I feel I have been fully involved in all decision making, and the company's highly skilled advisers have shown commitment and patience in any dealings I have had with them. I have also always found them to be easily accessible for any discussion I may require.

Denise Thornton -

A client since 2019

As a business owner and father of four children, finances are usually the last thing we think about. Stratton oversees and manages our finances, both in terms of advice for my business and our personal investments. It is comforting to know that our retirement, investment and life insurance planning has been taken care of. Darius and John are always so efficient in dealing with our affairs. As someone with no real understanding of the ins and outs, it has been fantastic to have experts giving us great advice and making sure our best interests are always the top priority.

Lee and Claire Parkinson -

Clients since 2016

Darius deals with my family’s finances and is a very trusted adviser. We meet a number of times a year, but I know I can call him any time if I have any questions. He is proactive, helpful and friendly!

Jonathan Dennis -

A client since 2019

Darius has been our adviser for a number of years, and when he told us he was starting his own firm, we had no hesitation in moving with him. We had a number of areas that we needed help with, including the complexities around an employee share scheme, investments for us and our new child, in addition to our retirement planning. Darius has continually provided us with a first-rate level of service and we would highly recommend Stratton.

Eamon and Holly O’Hara -

Clients since 2017

I knew I needed to begin saving and planning for the future but didn’t know where to start. Stratton helped me to understand my finances and put together a savings plan that is affordable and works for me. I now have and an ISA and a pension, and whilst retirement is many years away, I have the peace of mind that I am saving for my future. I look forward to working with them for many years to come.

Martin Corrigan -

A client since 2016

I have been impressed with the advice and service provided by Stratton Wealth Management and have always found Darius to be approachable, dependable and highly professional in his approach. It is reassuring to be able to have such a high level of confidence and trust when it comes to financial advice.

Russell Jones -

A client since 2018

Many thanks indeed for your in depth report for my client Mrs H – it is most thorough and above all readable. This might sound particularly strange; however you may well gather that in my profession we see many such reports, and I often feel that if the adviser fills it with charts and graphs it evidences a level of research. In truth most of what is produced is readily obtainable from the internet.

I would like to thank you (and your organisation) for your prompt and professional attention to my requirements on behalf of my client. As a practice we shall definitely be putting Stratton Wealth Management on our “preferred supplier list".

Colin Dunstall, Donaldson Dunstall Solicitors -

A client since 2015