Whilst this is a small triumph for UK mortgage borrowers, a recent House of Commons paper confirmed households with over 12 months mortgage arrears has quadrupled since 2007 leading to speculation that lenders will have to repossess tens of thousands of homes.
However the UK has responded with the solution of a payment waiver should this directive become law.
Roger Humber, chief executive at Protection Products Limited, said: “We are talking to a number of lenders about a mortgage waiver product because it provides a simple safety net to reduce arrears and repossessions.”
Payment Waiver is where customers’ obligation to repay is waived under certain circumstances, such as unemployment. Because the obligation has been cancelled and the customer has not failed to meet a payment obligation the 180-day EU guillotine is put on hold.
The FSA has recently finalised guidance on mortgage waiver products confirming how such a feature should be designed and implemented to ensure it adds value to mortgage customers.
Humber added: “The FSA has confirmed that a waiver product is not insurance but a contractual promise from a lender to waive payments which would otherwise fall due. Unlike payment protection insurance where lenders subsidised artificially low interest rates whilst selling PPI for excessive profits, a waiver product is not a separate product but a feature of the overall agreement paid for by the lender and contained within the advertised APR.”
