A New Pressure on Borrowers
Mortgage affordability in the UK has always been tied to interest rates, incomes, and deposit sizes. Yet in 2025, a new factor has entered the equation: insurance. What was once a predictable annual expense is now a significant financial burden, reshaping affordability tests and even affecting how much clients can borrow.
Premiums for both residential and buy-to-let properties have risen steeply in recent years, driven by extreme weather claims, rising construction costs, and tighter regulatory requirements. Borrowers are finding that these higher premiums are directly feeding into lender affordability models, reducing borrowing power even for those with strong incomes and robust financial profiles.
Why Insurance Costs Have Escalated
The surge in premiums is not a temporary blip. Increased flooding, subsidence and storm damage have forced insurers to price risk more aggressively. At the same time, inflation in construction materials and labour means the cost of rebuilding is higher than ever. Together, these factors have created a structural increase in premiums across the UK market.
For landlords and investors, the effect is even sharper. HMOs, blocks of flats and mixed-use buildings all carry higher risk profiles. Insurers are demanding bigger premiums, and lenders in turn are stress-testing those costs against rental income. As a result, once-viable portfolios are struggling to pass coverage ratios, even where rents remain strong.
How Lenders Are Responding
In 2025, lenders no longer treat insurance as a side-note in affordability checks. Instead, they apply assumptions about insurance costs into their stress tests—sometimes using regional data to model flood, fire or subsidence risk.
For landlords, this often translates into stricter Income Coverage Ratios. What once passed easily may now fail if premiums have doubled. For homeowners, particularly in high-risk regions, maximum borrowing can be trimmed to account for expected insurance outlay.
We looked at similar affordability pressures in our piece on
remortgaging buy-to-let properties in 2025. Insurance has now joined interest rates as a central factor determining how much lenders will advance.
Knock-On Effects for Borrowers
This shift creates a double challenge. Rising premiums eat into household or portfolio cashflow, while also reducing future borrowing potential. For landlords, net yields shrink at the same time as refinancing becomes more difficult. For homeowners, the shock of higher premiums can tip the balance between affordability and overextension.
Yet the consequences are not just financial. Deals are falling through when affordability checks reveal higher-than-expected premiums. Investors are being asked to provide evidence of insurance quotes before completion. And in some cases, lenders are pulling back from higher-risk property types entirely.
Why Insurance Itself Is Now Part of the Solution
This is where Willow Private Finance adds unique value. We don’t just structure the borrowing, we also arrange the insurance. Our in-house and partnered solutions cover the full spectrum:
- Buildings & contents cover to meet lender requirements and protect property values.
- Landlord and portfolio policies that can pool risk and reduce premiums across multiple assets.
- Personal protection including life cover, income protection and critical illness, which support affordability and safeguard families.
- Business protection for landlords, company directors and investors, ensuring that borrowing and income streams are secure.
By managing both finance and insurance, we can often improve affordability on both sides of the equation. Lower premiums mean stronger affordability assessments; tailored protection ensures long-term resilience. Few brokers offer this holistic service, but in 2025 it has become essential.
Strategies to Overcome Premium Shock
Borrowers are not powerless in the face of rising costs. By approaching lenders and insurers strategically, solutions can be found. For example, pooling policies across multiple properties often secures better rates than insuring individually. Adjusting cover levels or excesses can strike a balance between affordability and protection. Risk-reduction measures, from flood defences to fire systems, can also unlock savings.
From a finance perspective, alternative products like
offset mortgages can cushion higher outgoings by leveraging savings. Private banks may offer more pragmatic underwriting where bespoke insurance is in place. And specialist lenders can provide flexibility for unusual property types where premiums are unavoidable.
The crucial point is that insurance can no longer be treated as an afterthought. It must be integrated into mortgage planning from the outset.
How Willow Private Finance Helps
At Willow, we prepare clients for this new reality. We model affordability with realistic insurance assumptions, negotiate with lenders to ensure fairness, and—crucially—we can arrange the insurance policies themselves. By aligning borrowing with the right insurance strategy, we protect both lender confidence and client cashflow.
Whether you are a landlord facing higher portfolio premiums, a homeowner navigating affordability in a flood-prone area, or a business owner balancing borrowing with shareholder protection, we bring finance and insurance under one roof. That joined-up approach ensures your plans are not just viable on paper but resilient in practice.
📞 Want Help Navigating Today’s Market?
Book a free strategy call with one of our mortgage and insurance specialists.
We’ll help you structure the smartest finance and protection strategy—whatever rates or premiums do next.
