Pressure is set to mount on mortgage holders to buy MPPI cover as leaked details of talks between debt charities and mortgage lenders lead to increased speculation of a compulsory scheme.
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 and could give High Street banks a major payday, said Moneynet chief executive Richard Brown.
Brown said: “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, 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.
Brown commented: “Even then, they are only given assistance towards the interest on their repayments, so for many people it makes sense to arrange cover.
“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.
“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.
“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.”
