Home loan cover rip-off is exposed
THE DAILY MAIL - 27TH NOVEMBER 2002
Mortgage lenders are making up to 80 per cent in commission on the insurance borrowers take out to cover repayments.
Almost three million people have mortgage payment protection insurance.
But the huge commission charges mean insurance bought from lenders can cost almost twice as much as that available from brokers.
Borrowers are encouraged to have insurance cover because people who have taken out a mortgage since 1995 receive no state help with interest payments for the first nine months after losing their job.
With a growing number of new borrowers taking out mortgage payment protection insurance, the market is worth about £500 million. Many big lenders charge about £6 for every £100 of monthly mortgage payments.
Insurance brokers and building societies generally charge less than the banks. Nationwide’s policy, for example, costs £4.99 per £100.
Independent broker Charcol charges £4.90 and internet broker, moneynet, charges £3.95.
One of the most expensive policies is from Cheltenham & Gloucester, which charges £7.70 per £100.
To cover other household costs, it pays out more than your mortgage instalments, but starts only 60 days after you’ve been made redundant. If you can’t work because of illness or an accident, it pays out immediately. Simon Burgess, of insurance wholesalers Burgesses, says: ‘Some companies are profiteering. Often they sell inappropriate policies such as unemployment cover for the self-employed.
‘And most policies are linked to the mortgage, rather than the individual, so if you have a serious illness you are locked in to your lender.’
Richard Brown, of moneynet, says: ‘Greedy mortgage lenders are taking advantage because people take out cover at the same time as their mortgage without realising they can shop around.’
Mortgage payment protection insurance policies usually insist that you have been employed full-time for at least six months before you can claim.
The cover typically continues only for 12 months and starts to pay after 30 or 60 days.
However, others make you wait for up to 120 days and the longer you are prepared to wait the cheaper the policy will be.
