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Mortgage Protection - ( for new and existing mortgage borrowers )

Accident, Sickness and Unemployment (ASU) cover, otherwise known as Mortgage Payment Protection Insurance (MPPI) or Mortgage Protection. It is designed to provide a monthly income to enable the mortgage payments to be met should you be unfortunate enough to be made redundant, or be unable to work due to an accident or sickness. It is not compulsory, unless the particular lender's scheme has it as a condition; however, it makes good sense.

The article below was taken from a trade press publication in November 2001

The Council of Mortgage Lenders (CML) is recommending that borrowers recognize that the future is uncertain and act accordingly. With the economy and the housing market set to slow down next year, now is a good time for borrowers to review whether they have a sufficient financial cushion against a drop in income, it says. New figures from the CML and the Association of British Insurers reveal that 21 per cent of all mortgage holders now have mortgage payment protection insurance. 32 per cent of people who took out mortgages in the first half of 2001 took out MPPI at the same time. Well over two million MPPI policies are now in force.

One of the most noteworthy features of the latest CML/ABI figures is the very high claims success rate for MPPI policies. 88 per cent of all MPPI claims were accepted, compared with 82 per cent a year ago. For accident and sickness claims, over 90 per cent were accepted.

Although most borrowers buy MPPI policies via their lender, an increasing number of policies are now being arranged via intermediaries (24 per cent of policies sold in the first half of 2001). This shows that the work that the CML and ABI have been doing to raise awareness among intermediaries of this type of insurance is bearing fruit.

The number of people with mortgage insurance has increased since the CML and ABI launched new standards for MPPI in July 1999, but the increase appears to be levelling off. The CML believes this could be due to various factors - in particular, the recent strong performance of the housing market and the low level of interest rates, which have helped to underpin buoyant consumer confidence. In this environment, many people may have felt confident enough not to need MPPI. But with the economy expected to slow down and the housing market beginning to cool, recent borrowers are now encouraged to look again at how they can protect their mortgage repayments. It is also appropriate for the industry to consider what else, as well as MPPI, can help to provide a safety-net, especially in the light of changing market conditions since the CML/ABI initiative was originally launched.

Michael Coogan, CML Director General, said: "With an economic slowdown under way, borrowers need to think seriously about recession-proofing their mortgage. Private insurance has a part to play in this. At the same time, sustainable home ownership is about more than just insurance - the economic environment, lending and arrears policies, and consumer behaviour all have a part to play. We also look to Government to introduce improvements to the benefits available to borrowers in most financial difficulty."

Mary Francis, ABI Director General, agreed "The current uncertain economic climate makes it all the more important that borrowers have financial protection against any unexpected loss of income," she said. "All borrowers should consider carefully the value of mortgage payment protection insurance in helping to safeguard mortgage payments."