The property ladder is usually talked about in terms of deposits, equity, and affordability but recent research reveals a less visible truth; moving up the ladder doesn’t automatically make customers more financially resilient.
The biggest risk to home ownership isn’t getting a mortgage – it’s sustaining it when life doesn’t go to plan.
In fact, whether you’re dealing with first-time buyers or second-steppers, income shock remains one of the biggest and least protected risks in the mortgage journey.
FIRST-TIME BUYERS
According to Nationwide, the average buyer has a monthly mortgage payment equivalent to 32% of their take-home pay – slightly above the long-run average of 30% and below the high of 48% recorded in 1989.
That sounds positive – until you look beneath the surface.
Most first-time buyers complete with very little savings left. When close to two-fifths of income is committed to the mortgage, even a short spell off work can cause immediate strain.
That risk is real. LifeSearch research shows 14% of mortgage holders would struggle with repayments immediately after losing income due to illness or injury, and almost half (46%) would be in difficulty within six months.
Despite this, protection at first purchase is still dominated by life insurance, largely because it’s linked to the mortgage transaction. Income protection, the product designed to deal with the most likely risk, is often deferred or dismissed as something to look at “later”.
The mortgage risk statement itself makes the case: “Your home is at risk if you do not keep up repayments.” Income protection is the product that directly addresses that risk. Yet it remains the one most likely to be deferred.
For brokers, this is where the conversation needs to change. For first-timers, protection shouldn’t just be about clearing the mortgage – it should be about keeping the home when income stops.
SECOND-STEPPERS
There’s an assumption that once customers move up the ladder, financial vulnerability falls away. Research from Barclays challenges that thinking.
Barclays found that around one in five second-steppers still needed financial support from family or friends to buy their next home, often receiving larger sums than first-time buyers. That tells us two things.
First, even with equity and higher incomes, many households are still stretching affordability. Second, the cost of something going wrong is much higher.
Second-steppers are typically juggling larger mortgages, childcare and education costs as well as a greater reliance on two incomes. Lifestyle commitments become harder to unwind as you step up – and I say that from personal experience. When you sit back and look at the direct debits that accumulate over time, the financial exposure is sobering.
Skipton’s data backs this up. While second-steppers may spend a slightly lower percentage of income on mortgage payments, their overall exposure is significantly greater.
Yet this is often the point where protection reviews don’t happen. Cover arranged at first purchase is left untouched even though the customer’s risk profile has changed completely.
THE BIGGER PICTURE
More than a third of mortgage holders still have no life insurance, no critical illness cover and no income protection at all.
That’s not just a first-time buyer issue. It runs all the way up the property ladder. New research from LV= shows just how exposed many households really are.
Nearly half of UK households could only survive for up to three months without income, and 41% of working couples rely on both incomes just to meet monthly outgoings. For second-steppers, this is particularly uncomfortable reading.
Larger mortgages, childcare costs and lifestyle commitments mean there’s often less flexibility than people assume. Equity might build over time, but it doesn’t pay the bills if one income disappears.
Every home move should trigger a protection conversation.
Every customer who moves home should get a fresh protection conversation. Not a tick-box review – a real one. Customers’ lives evolve as they climb the ladder, and their protection needs to evolve with them.
A regular review isn’t just good compliance practice, it’s how brokers identify gaps and changing needs before they become problems. It’s how to continue to deliver genuinely good outcomes, and evidence that.
If we want customers to keep moving up the ladder, we need to make sure they’re properly protected while they do.
