Josh Smith 0:02
This podcast makes no representations. None of this constitutes advice and your home or property may be repossessed if you do not keep up with repayments on your mortgage.
Hello, and welcome to another podcast by myself and the mortgage nerd the man with the beard, the bearded broker, Lewis Shaw Good afternoon, Lewis
Lewis Shaw 0:28
Hiya, how are you Josh? Okay, I'm alright, I've got a sore throat, which I don't even pick up on here or now I'm battling through battling through being as professional as possible. So good to me. Oh, wow. It's the first time anyone said that. Louis, let's get straight into this, then. Today we are talking about why interest rates don't matter. And the machine you should always ensure I don't know where to start with that is to both things of interest rate, interest, interest rates don't matter. And to the machine, you should always ensure let's start with that. I want to unless leave some suspense in there, shall we? So let's talk about the machine later. Let's talk first about interest rates. Why? interest rates matter? Right. Okay. So, of course, that title is partially misleading, because, of course, I want people to click on the podcast and listen to it. But to a broad extent, interest rates don't matter, because and the reason they don't matter, is because we can do nothing about them. So of course, they matter in terms of
they are directly linked to the the amount that you're going to pay on your mortgage or on a loan, or the rate that you're going to get as a saver as a bank. But we can't influence them. And so I think we shouldn't worry about them. Now, a lot of people, when it comes to getting a mortgage and buying a home or remortgaging a lot of people are it known in the industry is so wonderful that some people are known as rate shoppers. And so kind of watch the rate rate of he got what he got.
And it's not a great way of thinking about your finances, because
often very, very, very low interest rates tend to have relatively high fees that come with them to effectively buy that product from the bank. So or building society. So generally, there's a trade off. If you want a super low interest rate, typically, you end up paying what's called a booking fee, or a product fee, they can be anything from 500, to 1000 to 1500 pounds, in some cases, a percentage of the value of the loan. So you know, if it's a big loan, it could be in the order of kind of 234 5000 pounds.
Now,
when you take all those things into account, the lowest rate doesn't always work out to be the cheapest deal. Now, the reason that people have got so hung up on interest rates, is when you see kind of TV shows, and there's, you know, a TV journalist kind of harping on about, you know, rates of this and dadadada da For example, I remember, there's a couple of weeks back, I saw a post by aforementioned TV journalist saying mortgage rates are below 1%, and why you should get one. Now, at the time, there were four deals below 1% out of about $10,000 products. So you know, we're talking about clickbait here. And the problem is, is that of course, people with that with large followings get a lot of traction, and then you get call after call after call, I've seen that mortgage rates are below 1%. Right? Okay, well, do you have 40%? deposit? No. Okay, do you have good credit? Not so much, right? Well, you're not gonna be eligible for that what deposit you have 10%? Right. So it's gonna be around the kind of two to 3% mark. Oh, where he said it's below one is the genomics. So there's that whole thing of, don't kind of get hung up on interest rates. Now, the second part of that is because interest rate tends to be as a broker, it tends to be the last thing you look at, because again, you can't change it, you can't do anything about the bank sets the deal. And that's that now, generally, when it comes to getting a mortgage, the way that I work, and I know a lot of the people that do what I do for themselves, this is the way that they work. They'll start it's almost like a triangle. So you start off at the bottom with, okay, what's your situation, I'm a first time buyer, I've got x amount deposit, this is my credit profile, this is my employment status. And we go okay, taking all that into account. As with all the lenders we got access to, these are the ones that you fit, right. Okay, so now after those ones that you fit, how much seem to borrow, I need to borrow x, right? Okay. So out of those lenders, you fit there six, they're going to give you the size of loan that you require. Then after that, we go How long do you want the mortgage for now, a lot of people kind of rock up and say 25 years, and that's just because it's been a hangover. It was a typically you got a mortgage for 25 years, but you can have a mortgage from five to 14 years. Not all lenders do that. But you can have a mortgage from five up to 40 years. So then we go right rather than picking arbitrary figure out to do too.
Five years, 30 years, we typically say, How much do you want to spend per month? Because for example, let's say that someone's renting at 600 pounds a month would say, don't be mortgage to be, you know, approximately 600 panels because you're used to paying that. Yeah. Okay. Well, that works out to be, I don't know, a 32 year mortgage. Okay, so of the lenders that you now match, they're going to give you the loan. What, which one? Or which ones are going to give you the first two years? Okay, well, so those 10 is now four. Okay? And after those four, what kind of deal do you want? Well, I want stability, security. So after a five, I'm after a fixed rate. Okay. So these now the fixed rates from those lenders, so we're constantly narrowing down, narrowing down until the point we get in, right, so we want a 32 year term for this amount of money on a five year fixed rate. And, and out of those now, this one out of that smaller category, that's now the best deal, whatever that rate is, is the rate. And it's no good kind of getting hung up on it, because we've got all these other things that and all these other factors that feed into it. And then in that respect, that's why I don't think and a lot of people I work with don't think they just don't matter, interest rates don't matter.
Josh Smith 6:12
I've got a note down here to talk about stats about first time buyers on that subject, I just want to ask a question that has been plaguing me for a while I keep seeing stuff online and in the papers and on telly about it being a good time for people buying property because property prices are low or vice versa. The question I've got is, is in realistic terms, what difference does it make for somebody because I would I don't know the stats. But I would say the majority of people buying a house are also selling a property to fund the purchase. Obviously, this doesn't apply to first time buyers, which I mentioned it so first time buyers and thought about him. It doesn't apply to them necessarily. But if you if you were taking the next step on the property ladder, Is there ever such such a thing as a good time to buy and sell? Because if it's if it's a good time to buy, and it's a bad time to sell it, but you're doing both? How does that work on balance? Sure. So
Lewis Shaw 7:06
this is often a thing that that just does crop up. In reality, the best time to sell your home to move up is when it's right for you. Because it's it's a bit silly to try and predict the market because most people can't.
Some people have the habit of when it comes to, you know, selling and buying a home, they
don't do it all that often. But they've kind of get in their head. Because they think that the Wolf of Wall Street,
which is I suppose a little bit rude on my part, but you know it is our people is you've got to remember
that when it comes to call of selling or buying a home, most people will will kind of have typically the stat shows about four to five houses throughout their life. So look perhaps move three or four times.
And, of course, that's over the period of perhaps 40 to 50 odd years, and things change. Now, when it comes to experience, if you imagine I've arranged in the region, I don't know about 1000 transactions or so so far. So and that's in six odd years. So if you imagine the experience I have in comparison to kind of just a person that's walking down the street, there's a couple of times, you can imagine that
there's a whole host of experience that I have and knowledge that I have, that they wouldn't have. And that's not their fault because they don't do my job in the same way that I wouldn't have the knowledge that they have at their job. So but people do come sometimes get misled in terms of what's the market doing what's the market doing, but actually it's pointless trying to predict it. So you write often, often when it's a good time to buy, it's a bad time to sell and vice versa. So they are they are
linked in that way that they do tend to be opposites now at the moment, it's a great time to sell because there's not many houses about at the moment on the market. There's a shortage of stock which is meant that prices have been pushed up coupled with the stamp duty holiday that we've still got going on until the 30th of September if you're buying up to 250,000 pounds. That has meant that the property markets become red hot but because there's a such overwhelming demand and not enough supply, that's meant that people selling the homes are getting great prices for them and prices have risen I think it's something like 10% year on year it's been absolutely mental how fast and far house prices have gone in the last 12 months given that we've just had one of the worst economic hits since for well in about 300 years when it comes to GDP dropping because of COVID and shutting down the economy so it is a bit odd.
Now that said hopefully will continue as it is but as prices rise of course that pushes it out of the, erm, makes it more not pushes it out of the boundary of first time buyers but makes it harder for first time buyers to get on the ladder because that first property then becomes more expensive. So at the moment is great if you're selling bought is not great if you're buying because house prices have risen that said
Still a saving to be hard. If, if you buy up to 200, well, up to 400 or 500,000 pounds, because you're still getting two and a half 1000 pounds off of your stamp duty cost, as long as you legally complete by the 30th of September 2021.
Josh Smith 10:14
Well, that's something you've searched out there something I was going to pick up on, I was gonna say in layman's terms, then basically, when we talk about the market being good for buying or selling, it really only affects in large terms. And this obviously isn't, you know, this doesn't apply to everybody, I appreciate it, there's always going to be different circumstances. But by and large, it's really only going to affect opposite ends of the spectrum. So first time buyers will wait for the market or or will hope the market is suitable for buying. But then at the opposite end of the spectrum, somebody who is getting towards the end of their time, that may well be selling a property and renting or moving sheltered accommodation or something or nursing homes and care homes or whatever it may be retirement homes, that sort of thing. For their final years, would want it to be a seller's market, but anyone in between this already in a property moving into another one, it doesn't really make much difference.
Lewis Shaw 11:03
No, that's right, because
you only sell you a house. So here's the thing, a house is only ever worth another house. So forget about the kind of the parents in the pens, a house is worth a house.
And we get hung up on house prices. Now, we often think that rising house prices is a good thing. But that's because we kind of forget the logic behind this. But you know, if house prices rise, yes, your home's worth more, but then you've got to spend spend, spend more and then pay more to buy a bigger home. So you never actually materialise, that wealth. That kind of equity that's tied up in your property never gets realised until it's sold. Now, of course, you always need somewhere to live. And therefore, rising house prices don't really make anyone wealthier apart from people like me, solicitors, estate agents, and banks. In reality, they're the people that do well after this, you know, so long way continue. For me, I'm just being honest, with actual fact, unless you've bought a home, for example, let's say you had a home in London, and you bought it 20 years ago, I actually when I lived in London, I knew a couple, a gay couple, they were fantastic. And they bought their first home things buying kind of 1980 and tooting back. And they bought it for a really, really low price. Anyway, they had it valued because they were wanting to move out of London, again towards the kind of retirement age. And if you're going to buy something like 1.1 million pounds over the course of their ownership of it, they've done nothing for that money. Other than just managed to get on the housing ladder, in a part of London at the time, that wasn't particularly nice. And they could afford it, which has now become Uber trendy. They're going to be selling while they sold that house moved out to the Kent countryside, sort of about 1.3 million, and it was like a three bed.
kind of typical London terraced house. It was It was lovely. Don't get me wrong, it was lovely.
So they made a profit because they could go and buy something for 400,000 pounds, and they've got absolutely stacks and stacks of money to live on for the retirement. That however, is not the norm for most people. Absolutely. While we're on the subject and let's let's talk a bit more about first time buyers. And let's look at some stats around that. Sure. So So I've kind of done a bit of digging this, these kind of various polls and, and poll companies that kind of do this stuff. And I think it's important that first time buyers know that the feelings that they have and the concerns and worries that they have all people have them so
there was a survey by money.co.uk
31% of first time buyers
feared that their home could drop in value and negative equity 26% were worried about saving of deposit versus house price increases. 22% more worried about affordability of the mortgage long term 13% are concerned about COVID-19 influences spiking prices, which has happened and just over 10% worried about breaking them with their significant other partner after buying together. So they are those concerns. I mean, this is a this is a this is a weird stat. I didn't even realise this was a thing. But according to nerdwallet in 2021 74%, almost three quarters of first time buyers have admitted they prioritise a financially stable partner over love. I don't know how I mean that's a that's a big thing again three quarters 76% of first time buyers in the UK a couple are couple households
Josh Smith 14:45
to the partner because by law of averages their partner agrees with them anyway if a three out of four people think that
my partner he's not sure anyway, whatever and say I don't really love you but you are financially stable, and I can just imagine what a lovely warm relationship
that would be sat in there now.
Lewis Shaw 15:01
Yeah, exactly. I love your financial stability. I love yours, too. Yeah, I'm getting hot under the collar about how well you manage your credit.
It's just not gonna happen anyway. So, again, atom bank did a study in 2020 atom bank is a kind of challenger bank, they don't have the brand of digital mortgages. 64% of the nation's first time buyers admitted to feeling anxiety. When tackling the challenge of the mortgage process, almost four out of five first time buyers claim homeownership improves mental health. And that's 2021 study by co ownership, boosted home ownership boosted their confidence and remove the worry of fluctuating rent. And also an interesting one. The average age of a first time buyer in the UK
is 34 years old. That's by finding common August 2020. That's up six years since 2007. So in 2007, the average age was 28 is now 34. So there's some some stats for you. Interesting stuff I was I was fortunate I bought my first house when I was 25. I'm still in it. And it was cheaper, the repayment is cheaper than the rent was, which frustrates the life. I mean, when I speak to a lot of friends, I went school with my age that still went in because they you know, they try and get a mortgage and they say we don't trust you can pay this back. And they quite reasonably argue, well, what I'm paying per month now is more than the mortgage repayment would be. So if I can afford to pay what I'm paying Now, why can't I afford to pay less per month? And it is I sympathise with him entirely. I really do. I mean, to be fair, I have seen that kind of meme going around saying where you know, we're the bank, say, give us a 25,000 pound deposit to prove that you can pay this mortgage and the mean goes, Well, I'm paying 1000 pounds a month in rent. So actually, that's quite a good topic I can I can dive into that and give you the actual answer as to why that is the case. Let's Let's save that. Let's do that next week, because we've got loads today. But then a nice little teaser for anybody that's in that situation. We'll definitely delve into that next week. And Louis, one more thing I want to ask and then we're going to summarise with a few top tips before we finish for today. for first time buyers, we've just discussed the stats about first time buyers, people who won't have made an offer on a house before. What's the way to do that, because it can be more important than you might think. Yeah, that's right, often, to be fair, that this is a general psychological principle. And even when we know about it, we can't avoid being influenced by it. So I'll In fact, I'll try it with you, Josh.
Unknown Speaker 17:31
Would you rather buy a yoghurt? That 75% fat free? Or yoghurt? There's 25%? Fat? They're both exactly the same? Yeah, but which one? Would you actually if you if you're in a shop, which one would you pick up?
Unknown Speaker 17:44
Neither, because I don't really yoga. But for the purpose of this, I suppose I would go with the one that says 75% less fat? Because it sounds more appealing. I can see where you're going with this. But yeah,
Unknown Speaker 17:59
yeah. And again, it is about because actually, it is a psychological principle that we can't we even as I say, even when we know about it, we can't nevertheless be influenced by So for example, if it if it comes to buying condoms, do you buy the condom that says 99% successful? Or would you buy the one that says if you buy this, there was a 1% chance you could get someone pregnant?
Unknown Speaker 18:20
Well, I've talked to a man who's got two children and one on the way. So it's not a headache I've had but again, I assume it would be the one that is 99%. Successful.
Unknown Speaker 18:30
Exactly. And so in when it comes to making mortgage offer, it's exactly the same. So it's about making sure that it's positioned in the appropriate way. Because actually, it's not always about who's going with the highest price, of course, the price will matter. The price will always matter. But it doesn't matter as much as you think. Because, for example, first time buyers are generally always in the position to chain free. They've got their deposit together. Ideally, you know, if they've been to see me, which is the right way to go about if they've been see me, then they've got their agreements in principle. And so that's a very attractive prospect for someone who wants to sell because because you know that they're prepared, they're organised, they're ready to go. So when that offer comes in, even if it is not the highest, it might be the lowest, but actually being in the best position and making sure that that gets across can have more of an impact. And people might actually realise it's like that whole old thing is it so there was a young monk in a monastery and he spoke to the abbot. And he said to the abbot, when we're praying, is it okay if I smoke? And he said, Absolutely not. There will be sacrilege, don't don't be you know, it's terrible. And the young monk went on a slight psychology course and a couple of days back a couple of days later, he comes back and he says to the abbot, is it okay to smoke while I'm praying, of course, my child You know, so it's about how it's phrased is about how things are put across, that can make all the difference.
Unknown Speaker 20:08
Interesting. What about for somebody who, let's say they've paid off their property completely. So obviously, again, by and large, lots of people moving up the property ladder will still have an existing mortgage on the property. But they'll be looking to sell an upsize into a bigger property. With the same sort of benefit apply. You talked about first time buyers being in that privileged position? Would the the same thing apply? If you were to say, Well, obviously, I've got shame, because I've got my property to sell, but there's no mortgage on it is fully paid off? Is that a benefit?
Unknown Speaker 20:41
When it comes to selling, you're still in the chain? So it's easier because there's not a mortgage to remove by way of legal charge. So it is easier, but no, it doesn't really have that much of a benefit from a list, or at least not. I don't think he does. Some people may disagree. Fair enough.
Unknown Speaker 20:58
Louis, one final thing, then before we call it a day, what would be your top tips for first time buyers to get properly prepared?
Unknown Speaker 21:09
So the first thing, absolutely the first thing that you should always do is sit down. Together, if you borrow on your own, or you know whether you're a couple, sit down and have a look at your own finances. How much can you afford? So you may know how much you can afford? Because perhaps you're renting and you're thinking, Well, actually, I want to keep it around the same level as or enter a little bit cheaper. But if you're, for example, living with parents or family, or friends, to sit down and go, right, how much can I feasibly afford to pay per month? So that's the first step. The second step would be then to jump to Google and search for something along the lines of mortgage broker near me. Best independent broken me, where can we get mortgage advice? Have a look online? and have a look at a few websites? And check out their reviews? Are they independent? Do they charge a fee? If the if so what is that fee? Have a read of their reviews? Are they good quality? Do you like the look of them? Do you like the look? Do you like the sound of what they're doing? Is there any resources that you can use? And then if you're comfortable with that, perhaps give them a call and make an appointment. So what happens is, for example, a lot of first time buyers in around the Mansfield Nashville area generally will come and see me in the office. They'll bring all the documentation, passport, driving licence, payslips bank statements, I'll get a credit file, etc. We'll sit down, we'll go through that in detail. I'll talk to them and establish what kind of things are important to them. You know, are you looking for stability of a fixed rate? Or are you happy to have more risk and go with something that's very well, if it might be a bit cheaper? How do you feel about fees? So we talk all about the kind of what type of mortgage you want? Then we look at the affordability? How much can you borrow? How much do you want to borrow? And how much is that likely to cost and over what period of time to give them an idea of you know, what house they can then buy. And so by the time they've left my office, they will know what they can buy up to what that's likely to cost them and over what period of time. So they know in their own mind, right, I've set my boundary in terms of I'm looking at houses up to x and not above. And and this is the kind of, you know, price range they need to be sticking to. And that's a really, really good place to be because I've seen a number of times where first time buyers why not just first time buyers, to be fair, anyone they start house hunting, find something they love. And then it turns out that they can't get a mortgage on it, they get, you know, terribly disappointed. When it comes to our you know, I really wanted the house but you but you never could you could have never got that house anyway, you've not missed out on something because you could never have had it. But nevertheless, you still get that disappointment. So it's about being prepared, I can't stress how much being prepared matters, not to mention that it makes your life so much easier when you actually find that property. Because you've already got the agreement. In principle, we already know that it fits, we've already got the majority of the documentation that's required. So when you're ready to go when you're ready to push that button, it's a relatively straightforward and stress free and efficient process for people. Now, of course, things can always go wrong in the process they do. So they just can say that it's not worth what he wants to be. I mean, the stats are something like something like one in three property transactions fall through. So that's where someone's made an offer. If they've started the process, and it falls through one in threes, that's that's quite a significant amount of properties to fall through, you know, and, of course, people often assume it won't happen to them to them, but of course it does. We've got the stats, I think during COVID, it was about 40%. So four out of 10 properties where someone said, Yep, I'll accept that price. And yes, I'll buy it at that price. Four out of 10 of those fell through and didn't complete. That's an awful lot of disappointment.
Unknown Speaker 24:55
Yeah, yeah, absolutely. Yeah. So huge amounts. When we think about it's nearly half In essence, isn't it? And you talked earlier about people centred on three or four properties in their life, which means that statistically, it's going to happen to you at some points. And, Louis, thank you very much for your time. We'll be back next week. I think we've already we've already hinted at it, we're going to talk a little bit about getting a mortgage. When you're paying rent and being able to prove to a bank, you can afford to pay something when in your head, you're paying more than the mortgage repayments will be worth. But all the little traps and issues that can come with that Louis out once again, Oh, thank you. That's it's got something else go on, Louis. We didn't do the machine. We didn't do the machine. The most important bit. Yeah, yes. I don't know what this is. Right. So. Okay, in case we've forgotten, which I did, and why interest rates don't matter, which we've covered and the machine that you should always ensure, Louis, what is the machine that you should always ensure? Is it the microwave? No.
Unknown Speaker 25:54
issue may issue. So we've got this weird habit in the UK. And it is definitely a cultural thing. Because in is different in Europe, they take it, they're much more conscientious regarding this, but so in the UK, it is a perennial issue. So we insure cars, we insure TVs, we insure fridge freezers, we insure phones and laptops, we insure smartwatches. we insure bikes, we insure our home. And what we tend I mean, to be fair, we insure our health by paying National Insurance, we tend to not insure our ability to make an income. So our income we need. So far, there's not enough people that have you know that well in my eyes that have their income protected. So the machine that you should always ensure is this. Imagine that you've bought a home, you're a first time buyer over next time buyer, you've bought a home and you walk in, and there's a cupboard, you open the cupboard, and you didn't know it's a bit of a secret code, you open it, and there's a machine in the corner, and it says press here. And you find the instruction manual. And you can press the button on the machine in the secret cupboard once a month, and once a month, it spits out for example, 2000 pounds or 1000 pounds. If I came along to you and said, Would you like to ensure that machine will never ever break down no matter what happens that will continue continue to spit out at you 2000 pounds a month come rain, hell or high water? Most people when you put that to them say Well, yeah, definitely, definitely ensure that machine Of course I would if he's giving me 2000 pounds a month.
Unknown Speaker 27:33
Well, can I have two of these machines or three?
Unknown Speaker 27:36
Yeah, so actually, that machine is you it's your ability, the most important thing to ensure is your ability to earn an income. Now there is a specific plan out there called income protection benefit, or IPB. Or IP sometimes. And it's the one thing that most people don't have that everyone should have. So when it comes to insurance, most people automatically think of life insurance, which is a fantastic marketing ploy. Because actually is death insurance. But anyway. So there's life insurance, which pays out typically a lump sum in the event that you've passed away. So that's generally quite cheap, because most people don't just watch, we're all gonna die. Most people just don't drop dead in the street randomly does happen suddenly, but not that often. The next one you have, tends to be what's called critical illness cover, which is where, for example, heart attacks, strokes, and the dreaded cancer, were all out again, potentially a lump sum, it can be a monthly benefit, but typically, a lump sum, in the event that you're diagnosed with a critical and it's not just heart attack, stroke and cancer, but although they are the most three claimed for. And here's an awful stat statistic, a really awful one. So cancer is the most claim for critical illness on critical illness cover plans. I think the fourth or fifth most claimed for critical illness is where a child's being critical been diagnosis critical, and that's horrendous. That's the fifth I think, fifth most painful thing on it on a kick policy, which is really awfully sad, anyway. And then after that you've got IP, most people who go I'll have life insurance in case of die. If I can afford critical illness cover I'll get in case I get cancer income protection. Now I don't want that because I get sick pay. Well actually most people don't get great sick pay, or they've kind of got this mistaken notion that the state will support them. Now, sick pay isn't all that much is less than 100 pounds per week. I think the stats on this or something like most people if k is kind of how far to the breadline legal and general did a study on this. And he said it's a short period of time when you've kind of exhausted your savings, your overdraft, your credit cards, etc. It's only a couple of months you can manage without having any income. Now, often when we talk to people about this, it's difficult to be fair because insurance is actually far more complex than mortgages. But people don't obviously don't know that but it is because a mortgage is just a loan to buy a house. Of course you've got different lenders with different criteria, but fundamentally it's just a loan to buy a house. Where the insurance, insurance companies tend to have all manner of different kinds of criteria. So for example, I just give you this as an example. There is an insurer on a critical illness basis where the definition of a heart attack used to be, basically, someone would have to have their hands on your chest, massaging your heart, that was their definition of a heart attack. There's, so if you can imagine we've got two insurance plans, which one do you choose? Does that want to 20 pounds? Or is this 135 pounds? Now, of course, because I do this as a job, and I'm a qualified professional in this arena, I know what plans are good for what so you know, if you've kind of got a higher BMI, that insurer is not going to be particularly great with you. But this one will be I've had
Unknown Speaker 30:50
other excuse me, I've had a maybe cancer 10 years ago, okay, well, that insurance definitely out, but this one will be in. Now. For example, with the heart attack scenario, it used to be the case that I mean, this is this is now not so much the case. But he was the case back in the day. When I say back in the day, when he kind of three or four, five years ago, there was one insurer where if you'd had a heart attack, it was basically you've got to be on the surgeon's slab, and someone's kind of massaging your heart to go, yeah, that constitutes a heart attack will pay out. There's another insurer. And I'm not going to name them, of course, were by, for example, if you had a heart attack, I don't know if you're aware of this. But when you have a heart attack with a specific kind of enzyme or protein that's produced, and that can be picked up in your blood. So you could have had a heart attack never even known you'd have one because it was so small and so slight. But nevertheless, if that proteins in your blood, it means you've had a cardiac event. Now, that particular insurer, their policy, their definition was, if we find that in your blood, and a doctor says you've had a heart attack, or you've had a heart attack, we'll pay out, you can see there by actually, which is the better value plan. Now in terms of protecting your income. So we talk about the kind of life insurance the critical illness cover. But actually protecting your income is absolutely vital, because it's what allows you to do everything else. Now. We often don't think about it, and that's part of the reason is that if someone sat in my office, and we're going this is life insurance, this is a mortgage, this is critical. And as you can see people glazing over because there's a lot of information that they've never had to take in before. And I understand that. And often income protection is the kind of the correlation that actually gets forgotten about boys. Realistically, it's the most likely this the most claimed on plan in reality is the one that you're most likely to claim on. Because as I say, most people don't just randomly drop down dead in the, in the street. If you were critically ill, income protection will perish. So it's a bait. It's basically it's personal sick pay. And you can have it, for example, for your entire salary. And you could set it so that it pays out. Let's say I'm off work for three months, and then it starts to pay out and it will pay out in depending on the plan up until the retirement age. So if you can't work again, you're going to get your salary month in month out paid from our insurer. And therefore you're never at risk of kind of losing your home and all the rest of it. Now, of course not everyone can afford it, which is understandable, because it's not that cheap. But nevertheless, it is something that people should consider because as I say, when we when we take it back to the machine, if that machine was in people's houses, and I said I can insure that for you for 30 pounds a month. Who wouldn't buy that insurance?
Unknown Speaker 33:33
Absolutely. I think to be honest, there's so much there you just you mentioned there that people can gloss over and there's so much to talk about when it comes to insurance. I think that's a podcast in itself talking about different types of insurance and how that works. But we shall leave it there for now, Louis. I'll try again. I think we've covered everything. So thank you very, very much as always, and I will see you again next week.
Unknown Speaker 33:55
Lovely. Thanks very much, mate. Take it easy, and yeah, Cheers. Bye bye.
This podcast makes no representations. None of this constitutes advice and your home or property may be repossessed if you do not keep up with repayments on your mortgage.
Hello, and welcome to another podcast by myself and the mortgage nerd the man with the beard, the bearded broker, Lewis Shaw Good afternoon, Lewis
Lewis Shaw 0:28
Hiya, how are you Josh? Okay, I'm alright, I've got a sore throat, which I don't even pick up on here or now I'm battling through battling through being as professional as possible. So good to me. Oh, wow. It's the first time anyone said that. Louis, let's get straight into this, then. Today we are talking about why interest rates don't matter. And the machine you should always ensure I don't know where to start with that is to both things of interest rate, interest, interest rates don't matter. And to the machine, you should always ensure let's start with that. I want to unless leave some suspense in there, shall we? So let's talk about the machine later. Let's talk first about interest rates. Why? interest rates matter? Right. Okay. So, of course, that title is partially misleading, because, of course, I want people to click on the podcast and listen to it. But to a broad extent, interest rates don't matter, because and the reason they don't matter, is because we can do nothing about them. So of course, they matter in terms of
they are directly linked to the the amount that you're going to pay on your mortgage or on a loan, or the rate that you're going to get as a saver as a bank. But we can't influence them. And so I think we shouldn't worry about them. Now, a lot of people, when it comes to getting a mortgage and buying a home or remortgaging a lot of people are it known in the industry is so wonderful that some people are known as rate shoppers. And so kind of watch the rate rate of he got what he got.
And it's not a great way of thinking about your finances, because
often very, very, very low interest rates tend to have relatively high fees that come with them to effectively buy that product from the bank. So or building society. So generally, there's a trade off. If you want a super low interest rate, typically, you end up paying what's called a booking fee, or a product fee, they can be anything from 500, to 1000 to 1500 pounds, in some cases, a percentage of the value of the loan. So you know, if it's a big loan, it could be in the order of kind of 234 5000 pounds.
Now,
when you take all those things into account, the lowest rate doesn't always work out to be the cheapest deal. Now, the reason that people have got so hung up on interest rates, is when you see kind of TV shows, and there's, you know, a TV journalist kind of harping on about, you know, rates of this and dadadada da For example, I remember, there's a couple of weeks back, I saw a post by aforementioned TV journalist saying mortgage rates are below 1%, and why you should get one. Now, at the time, there were four deals below 1% out of about $10,000 products. So you know, we're talking about clickbait here. And the problem is, is that of course, people with that with large followings get a lot of traction, and then you get call after call after call, I've seen that mortgage rates are below 1%. Right? Okay, well, do you have 40%? deposit? No. Okay, do you have good credit? Not so much, right? Well, you're not gonna be eligible for that what deposit you have 10%? Right. So it's gonna be around the kind of two to 3% mark. Oh, where he said it's below one is the genomics. So there's that whole thing of, don't kind of get hung up on interest rates. Now, the second part of that is because interest rate tends to be as a broker, it tends to be the last thing you look at, because again, you can't change it, you can't do anything about the bank sets the deal. And that's that now, generally, when it comes to getting a mortgage, the way that I work, and I know a lot of the people that do what I do for themselves, this is the way that they work. They'll start it's almost like a triangle. So you start off at the bottom with, okay, what's your situation, I'm a first time buyer, I've got x amount deposit, this is my credit profile, this is my employment status. And we go okay, taking all that into account. As with all the lenders we got access to, these are the ones that you fit, right. Okay, so now after those ones that you fit, how much seem to borrow, I need to borrow x, right? Okay. So out of those lenders, you fit there six, they're going to give you the size of loan that you require. Then after that, we go How long do you want the mortgage for now, a lot of people kind of rock up and say 25 years, and that's just because it's been a hangover. It was a typically you got a mortgage for 25 years, but you can have a mortgage from five to 14 years. Not all lenders do that. But you can have a mortgage from five up to 40 years. So then we go right rather than picking arbitrary figure out to do too.
Five years, 30 years, we typically say, How much do you want to spend per month? Because for example, let's say that someone's renting at 600 pounds a month would say, don't be mortgage to be, you know, approximately 600 panels because you're used to paying that. Yeah. Okay. Well, that works out to be, I don't know, a 32 year mortgage. Okay, so of the lenders that you now match, they're going to give you the loan. What, which one? Or which ones are going to give you the first two years? Okay, well, so those 10 is now four. Okay? And after those four, what kind of deal do you want? Well, I want stability, security. So after a five, I'm after a fixed rate. Okay. So these now the fixed rates from those lenders, so we're constantly narrowing down, narrowing down until the point we get in, right, so we want a 32 year term for this amount of money on a five year fixed rate. And, and out of those now, this one out of that smaller category, that's now the best deal, whatever that rate is, is the rate. And it's no good kind of getting hung up on it, because we've got all these other things that and all these other factors that feed into it. And then in that respect, that's why I don't think and a lot of people I work with don't think they just don't matter, interest rates don't matter.
Josh Smith 6:12
I've got a note down here to talk about stats about first time buyers on that subject, I just want to ask a question that has been plaguing me for a while I keep seeing stuff online and in the papers and on telly about it being a good time for people buying property because property prices are low or vice versa. The question I've got is, is in realistic terms, what difference does it make for somebody because I would I don't know the stats. But I would say the majority of people buying a house are also selling a property to fund the purchase. Obviously, this doesn't apply to first time buyers, which I mentioned it so first time buyers and thought about him. It doesn't apply to them necessarily. But if you if you were taking the next step on the property ladder, Is there ever such such a thing as a good time to buy and sell? Because if it's if it's a good time to buy, and it's a bad time to sell it, but you're doing both? How does that work on balance? Sure. So
Lewis Shaw 7:06
this is often a thing that that just does crop up. In reality, the best time to sell your home to move up is when it's right for you. Because it's it's a bit silly to try and predict the market because most people can't.
Some people have the habit of when it comes to, you know, selling and buying a home, they
don't do it all that often. But they've kind of get in their head. Because they think that the Wolf of Wall Street,
which is I suppose a little bit rude on my part, but you know it is our people is you've got to remember
that when it comes to call of selling or buying a home, most people will will kind of have typically the stat shows about four to five houses throughout their life. So look perhaps move three or four times.
And, of course, that's over the period of perhaps 40 to 50 odd years, and things change. Now, when it comes to experience, if you imagine I've arranged in the region, I don't know about 1000 transactions or so so far. So and that's in six odd years. So if you imagine the experience I have in comparison to kind of just a person that's walking down the street, there's a couple of times, you can imagine that
there's a whole host of experience that I have and knowledge that I have, that they wouldn't have. And that's not their fault because they don't do my job in the same way that I wouldn't have the knowledge that they have at their job. So but people do come sometimes get misled in terms of what's the market doing what's the market doing, but actually it's pointless trying to predict it. So you write often, often when it's a good time to buy, it's a bad time to sell and vice versa. So they are they are
linked in that way that they do tend to be opposites now at the moment, it's a great time to sell because there's not many houses about at the moment on the market. There's a shortage of stock which is meant that prices have been pushed up coupled with the stamp duty holiday that we've still got going on until the 30th of September if you're buying up to 250,000 pounds. That has meant that the property markets become red hot but because there's a such overwhelming demand and not enough supply, that's meant that people selling the homes are getting great prices for them and prices have risen I think it's something like 10% year on year it's been absolutely mental how fast and far house prices have gone in the last 12 months given that we've just had one of the worst economic hits since for well in about 300 years when it comes to GDP dropping because of COVID and shutting down the economy so it is a bit odd.
Now that said hopefully will continue as it is but as prices rise of course that pushes it out of the, erm, makes it more not pushes it out of the boundary of first time buyers but makes it harder for first time buyers to get on the ladder because that first property then becomes more expensive. So at the moment is great if you're selling bought is not great if you're buying because house prices have risen that said
Still a saving to be hard. If, if you buy up to 200, well, up to 400 or 500,000 pounds, because you're still getting two and a half 1000 pounds off of your stamp duty cost, as long as you legally complete by the 30th of September 2021.
Josh Smith 10:14
Well, that's something you've searched out there something I was going to pick up on, I was gonna say in layman's terms, then basically, when we talk about the market being good for buying or selling, it really only affects in large terms. And this obviously isn't, you know, this doesn't apply to everybody, I appreciate it, there's always going to be different circumstances. But by and large, it's really only going to affect opposite ends of the spectrum. So first time buyers will wait for the market or or will hope the market is suitable for buying. But then at the opposite end of the spectrum, somebody who is getting towards the end of their time, that may well be selling a property and renting or moving sheltered accommodation or something or nursing homes and care homes or whatever it may be retirement homes, that sort of thing. For their final years, would want it to be a seller's market, but anyone in between this already in a property moving into another one, it doesn't really make much difference.
Lewis Shaw 11:03
No, that's right, because
you only sell you a house. So here's the thing, a house is only ever worth another house. So forget about the kind of the parents in the pens, a house is worth a house.
And we get hung up on house prices. Now, we often think that rising house prices is a good thing. But that's because we kind of forget the logic behind this. But you know, if house prices rise, yes, your home's worth more, but then you've got to spend spend, spend more and then pay more to buy a bigger home. So you never actually materialise, that wealth. That kind of equity that's tied up in your property never gets realised until it's sold. Now, of course, you always need somewhere to live. And therefore, rising house prices don't really make anyone wealthier apart from people like me, solicitors, estate agents, and banks. In reality, they're the people that do well after this, you know, so long way continue. For me, I'm just being honest, with actual fact, unless you've bought a home, for example, let's say you had a home in London, and you bought it 20 years ago, I actually when I lived in London, I knew a couple, a gay couple, they were fantastic. And they bought their first home things buying kind of 1980 and tooting back. And they bought it for a really, really low price. Anyway, they had it valued because they were wanting to move out of London, again towards the kind of retirement age. And if you're going to buy something like 1.1 million pounds over the course of their ownership of it, they've done nothing for that money. Other than just managed to get on the housing ladder, in a part of London at the time, that wasn't particularly nice. And they could afford it, which has now become Uber trendy. They're going to be selling while they sold that house moved out to the Kent countryside, sort of about 1.3 million, and it was like a three bed.
kind of typical London terraced house. It was It was lovely. Don't get me wrong, it was lovely.
So they made a profit because they could go and buy something for 400,000 pounds, and they've got absolutely stacks and stacks of money to live on for the retirement. That however, is not the norm for most people. Absolutely. While we're on the subject and let's let's talk a bit more about first time buyers. And let's look at some stats around that. Sure. So So I've kind of done a bit of digging this, these kind of various polls and, and poll companies that kind of do this stuff. And I think it's important that first time buyers know that the feelings that they have and the concerns and worries that they have all people have them so
there was a survey by money.co.uk
31% of first time buyers
feared that their home could drop in value and negative equity 26% were worried about saving of deposit versus house price increases. 22% more worried about affordability of the mortgage long term 13% are concerned about COVID-19 influences spiking prices, which has happened and just over 10% worried about breaking them with their significant other partner after buying together. So they are those concerns. I mean, this is a this is a this is a weird stat. I didn't even realise this was a thing. But according to nerdwallet in 2021 74%, almost three quarters of first time buyers have admitted they prioritise a financially stable partner over love. I don't know how I mean that's a that's a big thing again three quarters 76% of first time buyers in the UK a couple are couple households
Josh Smith 14:45
to the partner because by law of averages their partner agrees with them anyway if a three out of four people think that
my partner he's not sure anyway, whatever and say I don't really love you but you are financially stable, and I can just imagine what a lovely warm relationship
that would be sat in there now.
Lewis Shaw 15:01
Yeah, exactly. I love your financial stability. I love yours, too. Yeah, I'm getting hot under the collar about how well you manage your credit.
It's just not gonna happen anyway. So, again, atom bank did a study in 2020 atom bank is a kind of challenger bank, they don't have the brand of digital mortgages. 64% of the nation's first time buyers admitted to feeling anxiety. When tackling the challenge of the mortgage process, almost four out of five first time buyers claim homeownership improves mental health. And that's 2021 study by co ownership, boosted home ownership boosted their confidence and remove the worry of fluctuating rent. And also an interesting one. The average age of a first time buyer in the UK
is 34 years old. That's by finding common August 2020. That's up six years since 2007. So in 2007, the average age was 28 is now 34. So there's some some stats for you. Interesting stuff I was I was fortunate I bought my first house when I was 25. I'm still in it. And it was cheaper, the repayment is cheaper than the rent was, which frustrates the life. I mean, when I speak to a lot of friends, I went school with my age that still went in because they you know, they try and get a mortgage and they say we don't trust you can pay this back. And they quite reasonably argue, well, what I'm paying per month now is more than the mortgage repayment would be. So if I can afford to pay what I'm paying Now, why can't I afford to pay less per month? And it is I sympathise with him entirely. I really do. I mean, to be fair, I have seen that kind of meme going around saying where you know, we're the bank, say, give us a 25,000 pound deposit to prove that you can pay this mortgage and the mean goes, Well, I'm paying 1000 pounds a month in rent. So actually, that's quite a good topic I can I can dive into that and give you the actual answer as to why that is the case. Let's Let's save that. Let's do that next week, because we've got loads today. But then a nice little teaser for anybody that's in that situation. We'll definitely delve into that next week. And Louis, one more thing I want to ask and then we're going to summarise with a few top tips before we finish for today. for first time buyers, we've just discussed the stats about first time buyers, people who won't have made an offer on a house before. What's the way to do that, because it can be more important than you might think. Yeah, that's right, often, to be fair, that this is a general psychological principle. And even when we know about it, we can't avoid being influenced by it. So I'll In fact, I'll try it with you, Josh.
Unknown Speaker 17:31
Would you rather buy a yoghurt? That 75% fat free? Or yoghurt? There's 25%? Fat? They're both exactly the same? Yeah, but which one? Would you actually if you if you're in a shop, which one would you pick up?
Unknown Speaker 17:44
Neither, because I don't really yoga. But for the purpose of this, I suppose I would go with the one that says 75% less fat? Because it sounds more appealing. I can see where you're going with this. But yeah,
Unknown Speaker 17:59
yeah. And again, it is about because actually, it is a psychological principle that we can't we even as I say, even when we know about it, we can't nevertheless be influenced by So for example, if it if it comes to buying condoms, do you buy the condom that says 99% successful? Or would you buy the one that says if you buy this, there was a 1% chance you could get someone pregnant?
Unknown Speaker 18:20
Well, I've talked to a man who's got two children and one on the way. So it's not a headache I've had but again, I assume it would be the one that is 99%. Successful.
Unknown Speaker 18:30
Exactly. And so in when it comes to making mortgage offer, it's exactly the same. So it's about making sure that it's positioned in the appropriate way. Because actually, it's not always about who's going with the highest price, of course, the price will matter. The price will always matter. But it doesn't matter as much as you think. Because, for example, first time buyers are generally always in the position to chain free. They've got their deposit together. Ideally, you know, if they've been to see me, which is the right way to go about if they've been see me, then they've got their agreements in principle. And so that's a very attractive prospect for someone who wants to sell because because you know that they're prepared, they're organised, they're ready to go. So when that offer comes in, even if it is not the highest, it might be the lowest, but actually being in the best position and making sure that that gets across can have more of an impact. And people might actually realise it's like that whole old thing is it so there was a young monk in a monastery and he spoke to the abbot. And he said to the abbot, when we're praying, is it okay if I smoke? And he said, Absolutely not. There will be sacrilege, don't don't be you know, it's terrible. And the young monk went on a slight psychology course and a couple of days back a couple of days later, he comes back and he says to the abbot, is it okay to smoke while I'm praying, of course, my child You know, so it's about how it's phrased is about how things are put across, that can make all the difference.
Unknown Speaker 20:08
Interesting. What about for somebody who, let's say they've paid off their property completely. So obviously, again, by and large, lots of people moving up the property ladder will still have an existing mortgage on the property. But they'll be looking to sell an upsize into a bigger property. With the same sort of benefit apply. You talked about first time buyers being in that privileged position? Would the the same thing apply? If you were to say, Well, obviously, I've got shame, because I've got my property to sell, but there's no mortgage on it is fully paid off? Is that a benefit?
Unknown Speaker 20:41
When it comes to selling, you're still in the chain? So it's easier because there's not a mortgage to remove by way of legal charge. So it is easier, but no, it doesn't really have that much of a benefit from a list, or at least not. I don't think he does. Some people may disagree. Fair enough.
Unknown Speaker 20:58
Louis, one final thing, then before we call it a day, what would be your top tips for first time buyers to get properly prepared?
Unknown Speaker 21:09
So the first thing, absolutely the first thing that you should always do is sit down. Together, if you borrow on your own, or you know whether you're a couple, sit down and have a look at your own finances. How much can you afford? So you may know how much you can afford? Because perhaps you're renting and you're thinking, Well, actually, I want to keep it around the same level as or enter a little bit cheaper. But if you're, for example, living with parents or family, or friends, to sit down and go, right, how much can I feasibly afford to pay per month? So that's the first step. The second step would be then to jump to Google and search for something along the lines of mortgage broker near me. Best independent broken me, where can we get mortgage advice? Have a look online? and have a look at a few websites? And check out their reviews? Are they independent? Do they charge a fee? If the if so what is that fee? Have a read of their reviews? Are they good quality? Do you like the look of them? Do you like the look? Do you like the sound of what they're doing? Is there any resources that you can use? And then if you're comfortable with that, perhaps give them a call and make an appointment. So what happens is, for example, a lot of first time buyers in around the Mansfield Nashville area generally will come and see me in the office. They'll bring all the documentation, passport, driving licence, payslips bank statements, I'll get a credit file, etc. We'll sit down, we'll go through that in detail. I'll talk to them and establish what kind of things are important to them. You know, are you looking for stability of a fixed rate? Or are you happy to have more risk and go with something that's very well, if it might be a bit cheaper? How do you feel about fees? So we talk all about the kind of what type of mortgage you want? Then we look at the affordability? How much can you borrow? How much do you want to borrow? And how much is that likely to cost and over what period of time to give them an idea of you know, what house they can then buy. And so by the time they've left my office, they will know what they can buy up to what that's likely to cost them and over what period of time. So they know in their own mind, right, I've set my boundary in terms of I'm looking at houses up to x and not above. And and this is the kind of, you know, price range they need to be sticking to. And that's a really, really good place to be because I've seen a number of times where first time buyers why not just first time buyers, to be fair, anyone they start house hunting, find something they love. And then it turns out that they can't get a mortgage on it, they get, you know, terribly disappointed. When it comes to our you know, I really wanted the house but you but you never could you could have never got that house anyway, you've not missed out on something because you could never have had it. But nevertheless, you still get that disappointment. So it's about being prepared, I can't stress how much being prepared matters, not to mention that it makes your life so much easier when you actually find that property. Because you've already got the agreement. In principle, we already know that it fits, we've already got the majority of the documentation that's required. So when you're ready to go when you're ready to push that button, it's a relatively straightforward and stress free and efficient process for people. Now, of course, things can always go wrong in the process they do. So they just can say that it's not worth what he wants to be. I mean, the stats are something like something like one in three property transactions fall through. So that's where someone's made an offer. If they've started the process, and it falls through one in threes, that's that's quite a significant amount of properties to fall through, you know, and, of course, people often assume it won't happen to them to them, but of course it does. We've got the stats, I think during COVID, it was about 40%. So four out of 10 properties where someone said, Yep, I'll accept that price. And yes, I'll buy it at that price. Four out of 10 of those fell through and didn't complete. That's an awful lot of disappointment.
Unknown Speaker 24:55
Yeah, yeah, absolutely. Yeah. So huge amounts. When we think about it's nearly half In essence, isn't it? And you talked earlier about people centred on three or four properties in their life, which means that statistically, it's going to happen to you at some points. And, Louis, thank you very much for your time. We'll be back next week. I think we've already we've already hinted at it, we're going to talk a little bit about getting a mortgage. When you're paying rent and being able to prove to a bank, you can afford to pay something when in your head, you're paying more than the mortgage repayments will be worth. But all the little traps and issues that can come with that Louis out once again, Oh, thank you. That's it's got something else go on, Louis. We didn't do the machine. We didn't do the machine. The most important bit. Yeah, yes. I don't know what this is. Right. So. Okay, in case we've forgotten, which I did, and why interest rates don't matter, which we've covered and the machine that you should always ensure, Louis, what is the machine that you should always ensure? Is it the microwave? No.
Unknown Speaker 25:54
issue may issue. So we've got this weird habit in the UK. And it is definitely a cultural thing. Because in is different in Europe, they take it, they're much more conscientious regarding this, but so in the UK, it is a perennial issue. So we insure cars, we insure TVs, we insure fridge freezers, we insure phones and laptops, we insure smartwatches. we insure bikes, we insure our home. And what we tend I mean, to be fair, we insure our health by paying National Insurance, we tend to not insure our ability to make an income. So our income we need. So far, there's not enough people that have you know that well in my eyes that have their income protected. So the machine that you should always ensure is this. Imagine that you've bought a home, you're a first time buyer over next time buyer, you've bought a home and you walk in, and there's a cupboard, you open the cupboard, and you didn't know it's a bit of a secret code, you open it, and there's a machine in the corner, and it says press here. And you find the instruction manual. And you can press the button on the machine in the secret cupboard once a month, and once a month, it spits out for example, 2000 pounds or 1000 pounds. If I came along to you and said, Would you like to ensure that machine will never ever break down no matter what happens that will continue continue to spit out at you 2000 pounds a month come rain, hell or high water? Most people when you put that to them say Well, yeah, definitely, definitely ensure that machine Of course I would if he's giving me 2000 pounds a month.
Unknown Speaker 27:33
Well, can I have two of these machines or three?
Unknown Speaker 27:36
Yeah, so actually, that machine is you it's your ability, the most important thing to ensure is your ability to earn an income. Now there is a specific plan out there called income protection benefit, or IPB. Or IP sometimes. And it's the one thing that most people don't have that everyone should have. So when it comes to insurance, most people automatically think of life insurance, which is a fantastic marketing ploy. Because actually is death insurance. But anyway. So there's life insurance, which pays out typically a lump sum in the event that you've passed away. So that's generally quite cheap, because most people don't just watch, we're all gonna die. Most people just don't drop dead in the street randomly does happen suddenly, but not that often. The next one you have, tends to be what's called critical illness cover, which is where, for example, heart attacks, strokes, and the dreaded cancer, were all out again, potentially a lump sum, it can be a monthly benefit, but typically, a lump sum, in the event that you're diagnosed with a critical and it's not just heart attack, stroke and cancer, but although they are the most three claimed for. And here's an awful stat statistic, a really awful one. So cancer is the most claim for critical illness on critical illness cover plans. I think the fourth or fifth most claimed for critical illness is where a child's being critical been diagnosis critical, and that's horrendous. That's the fifth I think, fifth most painful thing on it on a kick policy, which is really awfully sad, anyway. And then after that you've got IP, most people who go I'll have life insurance in case of die. If I can afford critical illness cover I'll get in case I get cancer income protection. Now I don't want that because I get sick pay. Well actually most people don't get great sick pay, or they've kind of got this mistaken notion that the state will support them. Now, sick pay isn't all that much is less than 100 pounds per week. I think the stats on this or something like most people if k is kind of how far to the breadline legal and general did a study on this. And he said it's a short period of time when you've kind of exhausted your savings, your overdraft, your credit cards, etc. It's only a couple of months you can manage without having any income. Now, often when we talk to people about this, it's difficult to be fair because insurance is actually far more complex than mortgages. But people don't obviously don't know that but it is because a mortgage is just a loan to buy a house. Of course you've got different lenders with different criteria, but fundamentally it's just a loan to buy a house. Where the insurance, insurance companies tend to have all manner of different kinds of criteria. So for example, I just give you this as an example. There is an insurer on a critical illness basis where the definition of a heart attack used to be, basically, someone would have to have their hands on your chest, massaging your heart, that was their definition of a heart attack. There's, so if you can imagine we've got two insurance plans, which one do you choose? Does that want to 20 pounds? Or is this 135 pounds? Now, of course, because I do this as a job, and I'm a qualified professional in this arena, I know what plans are good for what so you know, if you've kind of got a higher BMI, that insurer is not going to be particularly great with you. But this one will be I've had
Unknown Speaker 30:50
other excuse me, I've had a maybe cancer 10 years ago, okay, well, that insurance definitely out, but this one will be in. Now. For example, with the heart attack scenario, it used to be the case that I mean, this is this is now not so much the case. But he was the case back in the day. When I say back in the day, when he kind of three or four, five years ago, there was one insurer where if you'd had a heart attack, it was basically you've got to be on the surgeon's slab, and someone's kind of massaging your heart to go, yeah, that constitutes a heart attack will pay out. There's another insurer. And I'm not going to name them, of course, were by, for example, if you had a heart attack, I don't know if you're aware of this. But when you have a heart attack with a specific kind of enzyme or protein that's produced, and that can be picked up in your blood. So you could have had a heart attack never even known you'd have one because it was so small and so slight. But nevertheless, if that proteins in your blood, it means you've had a cardiac event. Now, that particular insurer, their policy, their definition was, if we find that in your blood, and a doctor says you've had a heart attack, or you've had a heart attack, we'll pay out, you can see there by actually, which is the better value plan. Now in terms of protecting your income. So we talk about the kind of life insurance the critical illness cover. But actually protecting your income is absolutely vital, because it's what allows you to do everything else. Now. We often don't think about it, and that's part of the reason is that if someone sat in my office, and we're going this is life insurance, this is a mortgage, this is critical. And as you can see people glazing over because there's a lot of information that they've never had to take in before. And I understand that. And often income protection is the kind of the correlation that actually gets forgotten about boys. Realistically, it's the most likely this the most claimed on plan in reality is the one that you're most likely to claim on. Because as I say, most people don't just randomly drop down dead in the, in the street. If you were critically ill, income protection will perish. So it's a bait. It's basically it's personal sick pay. And you can have it, for example, for your entire salary. And you could set it so that it pays out. Let's say I'm off work for three months, and then it starts to pay out and it will pay out in depending on the plan up until the retirement age. So if you can't work again, you're going to get your salary month in month out paid from our insurer. And therefore you're never at risk of kind of losing your home and all the rest of it. Now, of course not everyone can afford it, which is understandable, because it's not that cheap. But nevertheless, it is something that people should consider because as I say, when we when we take it back to the machine, if that machine was in people's houses, and I said I can insure that for you for 30 pounds a month. Who wouldn't buy that insurance?
Unknown Speaker 33:33
Absolutely. I think to be honest, there's so much there you just you mentioned there that people can gloss over and there's so much to talk about when it comes to insurance. I think that's a podcast in itself talking about different types of insurance and how that works. But we shall leave it there for now, Louis. I'll try again. I think we've covered everything. So thank you very, very much as always, and I will see you again next week.
Unknown Speaker 33:55
Lovely. Thanks very much, mate. Take it easy, and yeah, Cheers. Bye bye.
