Monthly Archives February 2011

Paying the Price of Equality – A Gender Gap Bridged

It’s fairly common knowledge that women tend to live longer than men. In fact, the Office for National Statistics has been conducting surveys for years and a boy baby born in current times can expect to live to 77.7 and a girl baby is expected to live to the ripe old age of 81.9

Apparently however, the gap has come down over the last 27 years from 6 years to 4.2 year which suggests men are taking better care of their health but there is still a clear gap.

For this reason, women actually pay slightly less for life insurance and that makes perfect sense.

But it could all be about to change.

The European Court of Justice is about to make a ruling over the legality of this ‘gender pricing’ (although it’s not really based on gender it’s based on life expectancy).

In September 2010 the Advocate General of the ECJ adjudicated that this differential pricing contravened the fundamental principle of equal treatment on the basis of gender which is enshrined in the Treaty on European Union.

The final written judgement will be published on 1st March.

So what does this mean?

Will insurance companies lower the price of cover for men to make it fair? Or will they increase the cover for women?

If I was a ‘business’ I know which one I’d do (not to mention that prices are based on a very thorough analysis of statistical information so it wouldn’t make sense to reduce the cost of cover for men).

It is uncertain if the ruling will bring about an immediate change or if the ECJ will allow insurers time to fall in line.

This is very unlikely to have any affect on existing policies but it could affect applications that are being processed and it will definitely impact new policy prices.

Is this right?

Statistically (based on provable facts) women live longer so surely they should be considered lower risk?

Is this really a gender issue?

I don’t really know much about how insurance is priced in the rest of Europe but I’d be interested to hear a woman’s opinion on this matter…

Either way, it could mean women have just 7 days to get covered before the price goes up…!?

Is it Time to Switch to a Fixed Rate Mortgage?

My mortgage has been on my lender’s Standard Variable Rate (SVR) for over a year now and once again the Bank of England has announced that the Base Rate is to remain at 0.5% for the 23rd month running.

So here I sit, safe in the knowledge that for another month my mortgage repayment will stay the same. The big question is, how much longer will it stay this way?

The talk of rate rises has been a buzz for sometime and as more time passes the louder the buzzing seems to be getting.

Markets were suggesting a 25% chance of rates rising today but a 25% chance isn’t that high.

If someone told me there was a 25% chance of winning the lottery I’d get my money out but it’s no comparison when it comes to trying to predict rate changes in this tumultuous economic climate.

When markets suggest there is a 75% chance or more that rates will rise, then the likelihood of an increase will be much more profound.

And the markets are suggesting a 75% chance of a raise in rates by May.

Here’s a good analysis of feelings and predictions:

But what of my mortgage?

Should I be thinking about a fixed rate for safety? I don’t think there’s much point considering a tracker at this stage because rates can’t get any lower. Even though trackers are still cheaper than fixed rates it wont take much of a rate rise to make them less competitive.

So I’m leaning towards a fixed rate but my worry there is what will rates be like in a few years time? If I fix my mortgage now for 2 or 3 years will it be a massive ‘rate-shock’ when I come to remortgage then?

I’m partially inclined to think not… Not because I don’t think rates will have risen by then but because rates have been exceptionally low for quite some time now and even if the base rate rises by 2% in 2 years time mortgage rates are not likely to sky rocket above and beyond the heights of late 2007 – 2008.

In early 2008 mortgage rates were about 5.6% for a 2 year fixed deal.

At the moment the average  is around 3% (if you want to pay a very high arrangement fee for a 1 year fixed deal the lowest is actually 2.14% – amazingly low but totally unrealistic as a product & Santander have a 2.65% offer but you have to go direct and they have on occasion been known to ‘cherry pick’ the best customers).

So if the base rate rises by 2% and Swap Rates do the same (currently about 2% for 2 year money) then mortgage rates might climb back up to around 5 – 5.5% ish.

Compared to a 3% product it would be a jump but compared to historical mortgage rates it’s actually not that bad!

Unless of course the cost of living goes up and income doesn’t, then it could be a squeeze….

Ah, the prevailing winds….