Rising mortgage costs force families to cancel life insurance, widening the protection gap
As five million households face higher repayments, many are dropping the cover they worry most about needing.
Five million UK households will face higher mortgage repayments when their fixed-rate deals end over the next two years, according to the Bank of England's July 2026 Financial Stability Report. For nearly 750,000 families paying below 3%, the average monthly rise will hit £170, leaving many to choose between their mortgage and other commitments, such as life insurance.
Financial advisers report a concerning trend: three in four now say clients are more worried about mortgage protection than a year ago. Yet 43% of advisers say clients wanting to take out cover then fail to follow through. The reason, in most cases, is simple: they cannot afford it alongside rising housing costs. The result is a paradox, a dangerous one: awareness of the need for protection is rising, but actual cover is falling.
For families with children, income earners, or significant debts, dropping life insurance is a false economy. Unlike mortgage payments, a life insurance payout is usually tax-free and can be written into trust to pass to loved ones outside the estate. It is precisely when household finances tighten that protection matters most, not least because borrowing costs are forecast to stay elevated through 2027.
Based on reporting by Mortgage Solutions (16 July 2026). Information only, not advice.
Information only. This is general information, not financial, tax or legal advice, and not a personal recommendation. Tax rules depend on your individual circumstances and can change. Please speak to a qualified, FCA-regulated adviser or a solicitor before acting.