Homeowners Will Have to Pick Up Compulsory Mortgage Payment Protection Tab, Warns Moneynet
September 21, 2006 (PRLEAP.COM) Business NewsPressure is set to mount on mortgage holders to buy mortgage payment protection insurance (MPPI) cover, as leaked details of talks between debt charities and mortgage lenders lead to increased speculation of an additional burden on homeowners.
Media speculation that record levels of missed mortgage repayments and the worrying debt mountain shouldered by UK homeowners will prompt the introduction of compulsory MPPI could give High Street banks a major payday, said Moneynet chief executive Richard Brown.
“Making this insurance compulsory would effectively mean substantial additional monthly costs would be passed on to homeowners, even if – as has been hinted – the Treasury demand that lenders and mortgage companies provide the cover as a bolt on to protect borrowers against falling into deep debt should they lose their jobs or be unable to work.”
Currently, barely a quarter – 24 per cent – of homeowners have an MPPI policy in place. Should the worst happen, and the main breadwinner loses their job, then they currently have to wait for nine months before qualifying for any State help with the mortgage by way of Income Support Mortgage Interest payments – and this is not available if you have savings in excess of £8,000.
“Even then, they are only given assistance towards the interest on their repayments, so for many people it makes sense to arrange cover,” said Brown.
“Whilst we agree that for many people this insurance offers valuable protection, we would caution against accepting quotes from most of the High Street lenders, which are known to be extremely expensive when compared to stand alone policies.”
“As our table shows, MPPI cover can be bought through the likes of British Insurance or Paymentcare.co.uk for a fraction of the cost of an identical policy offered by Cheltenham & Gloucester or other High Street giants.” (see table)
“One thing is for sure, however: if the Treasury does demand that lenders include compulsory cover, you can bet your bottom dollar that the industry will not be doing so out of altruism.
“If lenders are forced to foot the bill they will simply factor in the cost of the insurance by way of higher mortgage repayments. Ultimately, it is the homeowners who will lose out in order that the Government can boost its coffers through saving on paying out mortgage benefits.”
*All figures except C&G are based on £1,000 of monthly mortgage repayment. C&G calculation based on mortgage size and cover assumes a mortgage of £145,000 giving a monthly mortgage payment of £1,000.
Moneynet financial comparison website is the UK’s longest established online personal finance research and data analysts. The company offers consumers a choice of thousands of low cost financial services products. From mortgages, personal loans to motor, home and medical insurance, credit cards, savings accounts and best buy fixed rate products, Moneynet is one of the most comprehensive online services of its kind in the UK. Founded by chief executive Richard Brown, the Moneynet brand is destined to become one of the UK's major players in consumer finance products.
Consumer enquiries: 0208 460 2833
Richard Brown, Chief Executive, Moneynet 020 8313 9030
David Andrews, Director
01273 774109 / 07941 255855
David Andrews Media Ltd