Rising repossessions and mortgage arrears can be mitigated by MPPI
Genuine protection not costly
HOMEOWNERS without the safeguard of mortgage payment protection could find that a minor alteration to their spending habits could prevent them from losing the roof over their heads, says independent payment protection providerPaymentcare.co.uk.
With the number of homes being repossessed now standing at 77 every day* and the number of mortgages in arrears up to 125,000**, the credit crunch is clearly more than just a soundbite. The holidays are over and must be paid for and the problem is likely to escalate as borrowers grapple with the reality of dealing with mounting debts.
“Despite the ever-present spectre of repossession that can visit anyone with a mortgage, around three quarters of homeowners** decide that their budget doesn’t stretch to include MPPI,” says Paymentcare.co.ukMD Shane Craig.
“But for the price of a few pints in the pub, borrowers could buy themselves the security of mortgage payment protection insuranceand keep the repo man from knocking at their door, should their income dry up through sickness or unemployment.”
With the average new home loan now standing at £156,900*, borrowers with a 25 year repayment loan at 5.75 per cent, for example, need to find £987*** a month to service the debt.
But with the average price of a pint currently £2.60****, the cost of a couple of trips a week to the pub is all it takes for a family to ensure the keys to their front door stay firmly in their pocket.
With Paymentcare.co.uk’sLow Rate MPPI policy covering accident, sickness and unemployment, a premium of just £36.52 a month would provide a benefit of £987 a month for 12 months.
“Borrowers may well be sceptical about the value of MPPI considering the cloud that is hanging over loan payment protection insurancewhilst the issue is being thoroughly investigated by the Competition Commission,” says Craig, “but the reality is that MPPI has never suffered from the same criticism faced by loan PPI and its inclusion in the Competition Commission investigation was questioned by many in the industry.”
According to the Council of Mortgage Lenders, approximately £300 million a year is being paid via MPPI to borrowers in difficulty, with over 85% of claims being paid.
“Whilst no-one is suggesting that borrowers give up going to the pub in order to pay for mortgage protection, when you compare the costs involved it’s easy to see that MPPI isn’t going to break the budget,” he adds.
* Credit Action, 1 September 2007
** Council of Mortgage Lenders, June 2007
*** Financial Services Authority Money Made Clear mortgage calculator, September 2007
**** British Beer & Pub Association, September 2007