Alexander Burgess is a director of British Money
2014 looks to be a good year for lenders; more consumers are likely to apply for mortgages - buoyed up by the fastest growing economy since 2007 and the Government’s Help to Buy scheme. There was a time when borrowers taking out a mortgage were offered insurance, ensuring continuation of repayments should they lose their income, protecting borrower and lender from debt escalation.
Notice my reference to mortgage insurance is in the past tense. Nowadays, a growth in mortgage applications does not equate to an increase in protection business, it’s quite the reverse. There’s a huge protection gap in the UK, fuelled by a lack of any credible insurance products and a general scepticism by consumers of their ability to pay out.
In a bid to bridge that gap, I’ve designed a mortgage insurance product that WILL pay claims. It’s risk-free, highly-ethical, morally-responsible, cost-effective and lucrative for the lender. This product is a prudent risk management tool, mutually beneficial to consumer and lender, which reduces the likelihood of arrears and repossessions whilst enhancing the provider’s reputation.
Without this significant benefit, borrowers will be left to source their own financial support mechanisms, which in my view, are becoming fewer and fewer.
I’m sure you’re aware of the Government’s plans to change its Support for Mortgage Interest Scheme from a benefit into a loan. As well as clawing back the benefits, plus interest, once a property is sold, or upon death, the DWP is set to increase the waiting period from 13 weeks to 39 and reduce the capital limit from £200,000 to £100,000.
Changes are set to take place after 31 March next year and the repercussions for borrowers who rely on the £400m or so in benefits to help meet their mortgage repayments will be severe. It’s crucial plans are put in place NOW to ensure borrowers have access to a lender-backed support mechanism. Those who proactively tackle the protection gap face a win, win scenario; for themselves and their customers.
