Mortgage with tied insurance

Fortune82

A relative of mine told me today that he MUST get his life, buildings and contents insurance through his lender to qualify for the rate he's agreed. I thought Labour had legislated against this pratice years ago, anyone know the answer?

Wh05apk

Very unlikely, I think provided everything is upfront, then it can be part of the package, however I suspect this is simply an over eaber/desperate sales person, it sounds like they have gone direct, I would suggest they try a broker, as it is likely they will get a better deal, and certainly the insurance will be cheaper.

opinions4u

Fortune82 wrote: »

A relative of mine told me today that he MUST get his life, buildings and contents insurance through his lender to qualify for the rate he's agreed. I thought Labour had legislated against this pratice years ago, anyone know the answer?

The FSA (or one of it predecessors) regulated against this practice long before Blair was elected PM.

Your relative should ask for the requirement to be put in writing.

They should also complain, officially, to the lender in question and if they are not happy with the response escalate it to the FOS.

kingstreet

Section 9 of a key facts illustration tells what insurance products are required and which have to be taken through the lender.

dunstonh

You need to clarify the scenario as it is still allowed potentially. I believe the answers above are based on the assumption that it is not part of a special deal (in which case they would be correct)

A lender cannot insist on you taking out their insurance as a condition of lending. However, they can insist on insurance as a condition of lending. Still common for business customers of a bank. Rare for personal customers (other than building insurance which is always mandatory)

A lender IS allowed to offer special deals which can be cross subsidised by a purchase of another of their products. i.e. a special mortgage rate for those that buy their insurance. This is unusual nowadays but I believe that there was a lender recently that did this. They also have to have deals which do not have an insurance cross subsidy. However, the rate can be different.