The CML argued that mortgage payment protection insurance (MPPI) should be excluded from the referral.
MPPI provides an important safety net for home-owners. With just over a million claims paid since 1998, MPPI has undoubtedly saved many households from repossession.
Many of the concerns raised in the OFT report do not apply to MPPI. It is more widely available on a stand-alone basis than other forms of PPI; the price range is narrower (varying by 40 per cent from lowest to highest, compared with 150 per cent for wider PPI products); and it has a significantly higher "claims ratio", the proportion of premium income paid out as claims (33 per cent compared to 19 per cent in the wider PPI market).
The CML believed that any potential problems in the MPPI market are dramatically exceeded by the benefit to consumers. Any problems are already in the process of being addressed by the industry. If consumer and seller -confidence is knocked by the referral, take-up is likely to reduce. Indeed, this is already happening. Only 22.8 per cent of mortgages taken out in the first six months of this year were protected by MPPI, compared to 26.3 per cent in the first half of 2005. The CML fails to see how it can possibly be in the consumer interest for more home-owners to be put at risk.
Michael Coogan, director general at CML, commented: "The OFT should exclude MPPI from the Competition Commission referral, because of the significant differences that set it apart from the wider PPI market. The damage to confidence and take-up of MPPI that would be created by a referral cannot possibly be in the consumer interest."
