Confusion and consumer apathy is leaving 3.4 million homeowners up to £370 a year worse off because they believe they are tied to their lender for insurance products, a survey by Marks & Spencer Financial Services has found.
Research by the store group's insurance arm showed nearly half (49%) of all homeowners currently rely on their mortgage lender for mortgage payment protection insurance and home and contents cover.
This is despite the government repeatedly threatening to outlaw the practice of tying products to mortgages. Ministers recently dropped a bill that would have enforced the measure because of pressure on its parliamentary timetable.
Marks & Spencer's survey asked homeowners why they fail to shop around for mortgage-related insurance. The survey revealed convenience was the most quoted reason (by 75% of homeowners) for taking out insurance with their lender.
However, Marks & Spencer was shocked to find 38% taking out buildings insurance with their lender did so because they believed it was a condition of their mortgage. The figure was lower for mortgage payment protection insurance (32%) and home contents cover (25%). But 80% believed they could get a better deal elsewhere.
Peter Longstaff, head of general insurance at Marks & Spencer Financial Services, accused mortgage lenders of cashing in on the confusion felt by customers. He said: “We are concerned that the sales tactics they employ still serve to convince the customer that they have no choice but to take out insurance offered by their lender.”
The Marks & Spencer survey involved 1,000 mortgage holders.