The Sustainable Home Ownership Partnership (SHOP) scheme would see borrowers, the government and lenders all contribute to an insurance policy which would see 10 months of mortgage repayments covered should the home owner experience a prolonged period of unemployment, sickness or have an accident.
According to the JRF, only one in five borrowers have private insurance and with repossessions likely to rise in the coming months, a scheme to cover the massive shortfall was necessary.
The report stated: ‘During the last recession the existing safety nets for home owners were shown to be inadequate and some 300,000 households lost their homes in five years. Since then the state safety net has been cut back so that most home owners have to wait 9 months before they get help.
'The industry hoped that half of all home owners would take up private insurance by 2004, but this didn’t happen and take-up has now fallen.’
The report also indicated that SHOP should be compulsory for all new borrowers and remortgagors to ensure that the most ‘at risk’ borrowers were covered.
JRF believed the scheme would cost £3.40 per £100 of payments cover, with borrowers contributing 50 per cent and the government and lender adding 25 per cent each.
Malcolm Tarling, spokesperson for the Association of British Insurers, said: “There is already a mortgage payment protection insurance scheme in the current market which covers sickness, accident and unemployment. What it does not cover though is an economic downturn.”
