Job-loss fear for mortgages
MANCHESTER EVENING NEWS - 15TH JULY 2002
Workers in Greater Manchester are becoming increasingly worried about losing their jobs and the financial consequences that would follow.
Research by Birmingham Midshires shows that one in four employees are concerned about their about their long-term job security while the Council of Mortgage Lenders says only 31 per cent have insured their mortgage payments against the worst happening.
“Unemployment is their biggest concern about life in the future,” said Stephen Derges, Birmingham Midshires’ head of general insurance.
“This underlines the need for people to strengthen their finances and prepare for future possibilities.
“A period of unemployment could result in loss of earnings and inability to pay the mortgage, bills and other loans.
“Many homeowners would be shocked to discover they can’t rely on the state for help.
“There is a shortfall of nine months between a borrower first losing their income and the State carrying out an assessment for help with interest only payments on the loan.
“Unemployment can place a huge amount of strain on a family, and homeowners must take responsibility to protect their home. It is a small price to pay for their most valuable asset.
“But there is much complacency about insuring the regular household income – this is a dangerous position for many of us.”
More people are heeding the warnings, however.
More than a third – 36 per cent of home loans taken out in the last six months of 2001 were protected by mortgage payment protection insurance policies.
This compares with 32 per cent of mortgages in the first half of the year.
The other side of the coin, however, is that too many people are paying through the nose for mortgage payment protection insurance by accepting the deal offered by their own mortgage lender, according to Simon Burgess, managing director of Burgesses insurance brokerage.
“The lenders continue to offer increased and inappropriate finance to already overburdened borrowers, combined with in-house protection products that offer poor value.”
The average mortgage payment protection insurance policy holder would pay £5.80 per £100 from a mortgage lender, compared with £4.37 through a broker.
Monty Burn, ITV’s Mortgage Watchdog, said: “Most mortgage borrowers are a soft target for the clever marketing tactics of their lenders who will exploit them for all they are worth.”
The Research Department (TRD), says consumers should always check the small print on protection policies because of the initial exclusion period, which varies form 60 to 120 days, prohibiting claims for new policyholders.
Mark Hayes-Newington, TRD director, said: “If, at the time of taking out cover, an employee had even the slightest knowledge that his or her company may be planning for future redundancies, the insurer is likely to refuse payment on the policy.”
