'We will lose our dream home because Nationwide won't give us a mortgage unless we buy insurance from a provider that doesn't sell it…

  • Lender insisting home insurance is bought from a specific insurer 
  • Set insurer no longer sells home insurance or accepts new customers 
  • Alternative specialist cover won’t be accepted by Nationwide 
  • Buyers rejected because of impossible mortgage clause they’ll never be able to meet  

Rebecca Rutt For

Moving house can be a stressful experience at the best of times – but what happens when you’ve found your dream home and your lender rejects you because of a red-tape requirement that proves impossible to fulfil?

Sally Monoghan, 29, and her boyfriend Matt Larman, 28, are trying to buy a three-bedroom house in Egham, Surrey. It’s a high-risk flood area and the mortgage lender, Nationwide, says in order for the mortgage to be completed the buyers need to take out a buildings insurance policy with Phoenix – the company insuring the house at the moment.

But Phoenix, underwritten by Lloyd’s bank, no longer sells home insurance and stopped accepting new customers in 2006 so there is no way the couple can buy insurance from it.

Sally Monoghan, 29, and Matt Larman, 28  can't buy their dream home because Nationwide won't give them a mortgage unless they buy insurance from an insurer which doesn't sell home insurance

Sally Monoghan, 29, and Matt Larman, 28  can’t buy their dream home because Nationwide won’t give them a mortgage unless they buy insurance from an insurer which doesn’t sell home insurance

Sally, a nurse for the NHS, and Matt, who runs his own joinery business ML joinery, sought out a specialist insurer instead.

The first policy they found was through insurance brokers Culpeck but as the excess was greater than £1,000 Nationwide rejected this. The couple then got a quote for £150 per year from specialist insurer Sagit with an excess of £75 which would cover their new home as it includes high-risk flood areas.

But Nationwide refused to accept the second insurer and have now rejected the mortgage completely.  

After Sally’s mother died two years ago, and with some help from Matt’s parents, the couple were able to save £137,000 and now have a substantial deposit for the three-bedroom house, worth £340,000, that they want to buy.

‘The Surrey area is incredibly expensive, and when we found this house we fell in love with it. The property is a three-bed semi-detached which needs lots of work and updating and we are keen to put our stamp on it,’ says Sally.

‘The whole of Egham is in a flood-risk area and the house is raised three-feet off the ground. It’s never been flooded before, just its boundaries,’ she adds. 

We asked Nationwide why it had asked for insurance from a specific insurer and why it wouldn’t accept a policy from a different insurer.

Jill Parsons, spokesperson for the building society, says the mortgage offer was ‘only made on the condition of continuing cover with the existing provider’.

She explains that; ‘When this condition appears on the offer it must be fully complied with and there is no acceptable alternative.

Sally and Matt can't buy a new home because Nationwide refuses to give them a mortgage

Sally and Matt can’t buy a new home because Nationwide refuses to give them a mortgage

‘If for any reason the necessary cover is not available with the existing insurance provider, then the case cannot proceed,’ she adds.

When asked if the couple could use the alternative policy they had found, she says under the terms of the mortgage offer, there was never an option to seek insurance from another provider.

She adds: ‘All mortgage offers are made on an individual basis and may be subject to conditions as appropriate.’

‘We have looked in detail into this case and the set of circumstances and believe the decision remains correct.’

The reason for the stipulation in the mortgage is due to the fact that the property is in a high-risk flooding area.

In February 2014 the area was flooded badly and Nationwide says the recent events in Cumbria and elsewhere highlight that it is unrealistic to assume a property previously flooded in the manner of this property and area will not flood again. 

‘As a result, it is extremely unlikely that a mainstream insurance provider would be willing and able to cover flooding for this property on normal terms and premium,’ Parsons adds.

But what makes this case different is firstly the fact that the existing insurer no longer sells insurance. Therefore there is no way the couple could have bought insurance from it the first place.

Secondly, the couple did find alternative insurance with Sagit. This had a low premium and excess and covered high-risk flooding areas but Nationwide still would not accept this.

At the time of publishing Nationwide has not given us a reason why it wouldn’t accept insurance from a different insurer apart from stating that this was never an option on the mortgage agreement.  

The couple’s options now are to arrange a mortgage with another lender and use the Sagit insurance – or to abandon their hopes of moving to this house and start again from scratch.

Matt says what he’s most annoyed about is that ‘a company the size of Nationwide can treat people with such disregard.’

‘I have taken four days off work throughout the past three months just to try at sit on the phone and get answers’

‘I can completely understand that companies have criteria and clauses that need to be met, what I’m struggling with is that due to the original homeowners insurance company no longer offering home insurance then it’s completely impossible to meet the condition,’ he adds.

Nationwide added an extra clause to the mortgage because it's in a high-risk flood area, but it also won't let the couple take out insurance with another provider

Nationwide added an extra clause to the mortgage because it’s in a high-risk flood area, but it also won’t let the couple take out insurance with another provider

David Hollingworth, spokesperson for London & Country Mortgages, says: ‘Whilst lenders will always require there is adequate buildings insurance to be in place as a condition of the mortgage it is unusual to insist on the retention of the current insurer.’

‘The buyer should look to get a clearer understanding as to exactly why Nationwide is insisting on the term and why another insurer would not be unacceptable.’

‘That will be invaluable information and important for them to understand to help them find a solution with Nationwide or to avoid running into similar difficulty with another lender,’ he adds.

James Dalton, Director of General Insurance Policy at the ABI, comments: ‘Insurance is a highly competitive sector and different firms will use different methods to calculate risk when they are setting premiums.’

‘The insurance sector wants to ensure as many people as possible have access to affordable insurance to protect their homes and have taken steps specifically designed to increase competition in the market for areas of high-flood risk by investing millions in a new scheme called Flood Re.’ 


The Government’s ‘Flood RE’ scheme is set to launch next April and will give more help to households trying to buy home insurance in flood-prone areas. 

The scheme, which has been set up by the insurance industry and the Government, will cap the price homeowners pay for insurance in flood-prone areas to £210 a year for Council Tax ‘Band A’ homes to £540 a year for ‘Band G’ homes.

It will be funded by a levy of around £10.50 added onto all household premiums across the country.

The main aim of this scheme is to increase competition in the insurance market for those households in high-risk flood areas and to make sure more people have access to affordable insurance.

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