High Street Considering adding a MPPI to Mortgages
High street banks are discussing making Mortgage Payment Protection Insurance (MPPI) compulsory, according to releases from talks between debt charities and mortgage lenders. This move is in reaction to the increased level of missed mortgage payment, and lost income due to IVAs and Bankruptcies. The mounting debt carried by UK homeowners, has prompted High Street Banks to start discussing the MPPI.
The purpose of the MPPI is not to help homeowners survive financial hardship, but to help the banks recoup loses in revenue. Media speculations suggest that the new plan would add a heavy burden to homeowners.
Currently, less than 24 per cent of homeowners carry an MPPI policy. These policies are in place to help homeowners. A homeowner who looses their job must wait nine months before qualifying for any State help with the mortgage from Income Support Mortgage Interest payments, and this is not available if the homeowner has £8,000 in savings.
The Treasury has joined the talks, and is debating whether to force banks to make the insurance compulsory. At the moment, there are insurance companies that offer MPPIs for a fraction of the cost that High Street Banks charge. However, if the Treasury makes MPPIs compulsory, the market may see a drastic increase in the cost of a policy.
Lenders are reluctant to foot the bill. They will simply add the cost of the insurance to the mortgage repayments. The only one who will win in this situation is the High Street Banks and the Government.