Consumers confused over mortgage payment protection insurance safety net
MORTGAGE STRATEGY - 8TH APRIL 2002
Six out of 10 mortgage holders believe they have mortgage payment protection insurance, yet only two out of 10 have the policy in place, FSA research leaked to Mortgage Strategy reveals.
The internal research for the Financial Services Authority’s consumer division shows many borrowers relying on a safety net that isn’t there.
Three out of 10 respondents would be unable to make further mortgage payments without mortgage payment protection insurance if they became unemployed. While four out of 10 say they would use savings and investments to cover mortgage payments in the event of job loss.
Insurance broker Burgesses – which sells 4,000 mortgage payment protection insurance policies a month –claims lenders are charging homeowners £6 billion too much for mortgage payment protection insurance. Simon Burgess, managing director, says: “Lenders are ripping off their clients. They are too greedy and are using mortgage payment protection insurance as a profit centre.”
Charging an average of £5.80 per £100, the UK’s top 10 lenders take £8,700 in mortgage payment protection insurance over the 25-year life of a £500 per month mortgage. Burgesses’ best rate of £3.95 per £100 would save the same client nearly £3,000 – or over £6 billion for Britain’s 2.1 million mortgage payment protection insurance protected households.
Burgess adds: “Borrowers’ purses are so tight at the moment that mortgage payment protection insurance is not really a priority. By seeking independent advice mortgage borrowers can save thousands of pounds.”
Burgesses recently reported an increase in mortgage payment protection insurance demand due to rising fears of unemployment.
