Alexander Burgess is a director of British Money
High Street lenders should prevent first time buyers from falling into arrears by automatically including mortgage protection within their mortgage offer.
Auto-enrolment would cost lenders a fifth of what consumers pay for the cover and the additional insurance outlay could be recouped by adding it onto the APR at 0.009%.
This solution will address the protection gap issue and provide peace of mind for lenders and first time buyers that mortgage repayments will continue to be paid for up to a year if a salary goes due to unemployment, accident or sickness and the need could not be greater, with less than 3% of new borrowers having any form of mortgage protection and following the new MMR guidelines, lenders are now required to assess likely changes to borrowers’ income and expenditure and stress test against higher interest rates, but not consider how borrowers will continue to make their repayments if a salary goes.
This is despite figures from Shelter showing 3.8million families are just one pay cheque away from losing their home and feedback from the Money Charity which says 1300 people a day reported they had been made redundant between December 2013 and February 2014 and 133 mortgage possession claims and 103 mortgage possession orders are issued daily.
Everyone appears concerned about the increasing protection gap in this country, but no one is actively addressing the issue. It’s time for lenders to take the initiative and demonstrate to customers they really are customer-focused. And if lenders do not offer income protection, then first time buyers should be lobbying their mortgage providers to do so.
