Burgesses fight bad guys
MANCHESTER EVENING NEWS - 5TH JANUARY 2004
Mortgage lender are being accused of ripping-off customers by selling over-priced mortgage protection insurance which they don’t necessarily need.
In a recent survey of high street lenders’ branches, researchers from specialist broker Burgesses discovered widespread evidence of a scam.
Posing as self-employed borrowers who were unable to work because of stress, researchers approached 25 branches asking for a loan with mortgage payment protection insurance.
They found the average cost of Mortgage Payment Protection Insurance on the high street was six per cent – almost double the amount charged by independent providers – with Lloyds TSB topping the list at 7.7 per cent. None of the lenders pointed out that by shopping around for Mortgage Payment Protection Insurance borrowers could save themselves more than £3,000 over the life of the mortgage.
More shocking, says Burgesses MD Simon Burgess, only one lender asked about medical history or informed the researchers that pre-existing medical conditions are automatically excluded from Mortgage Payment Protection Insurance.
“With very few exceptions full Mortgage Payment Protection Insurance which includes redundancy cover is not worth the paper it’s written on for the self-employed or newly-employed contract workers as it’s almost impossible to claim,” says Burgess.
“Notwithstanding this, not a single lender pointed out that as self-employed people, the would be borrowers could simply not be made redundant.”
Burgess says that mortgage lenders are cagey about the amount of profit they make from Mortgage Payment Protection Insurance.
But with premiums exceeding £2bn and with commission more than 70 per cent of premiums, a profit of £1.5bn would not be too wide of the mark.
Burgesses has reported its findings to the General Insurance Standards Council which has been attempting to crack down on the mis-selling of Mortgage Payment Protection Insurance . A spokesman for the GISC said: “There is evidence that an awful lot of this insurance is sold to unwitting customers.”
Simon Burgess also states “Homeowners are enjoying some of the cheapest mortgage costs since the 1950’s thanks to low interest rates and competition between lenders.
“However, if we thought it was too good to be true we were right. Greedy lenders are claiming back billions by charging huge premiums for Mortgage Payment Protection Insurance.
“The price borrowers pay for Mortgage Payment Protection Insurance must be made clearer when they are signing up to a mortgage. This is yet more evidence customers must shop around when looking for a fair deal.”
