Braintree, Essex (PRWEB) January 23, 2009
Payment Protection Insurance lobbyist, Sara-Ann Burgess, from specialist firm Burgesses is calling for redundancy protection to become compulsory once a mortgage is agreed.
Her appeal is a result of increasing frustration that no proactive measures are being implemented to ensure people have a financial support mechanism in place before they lose their job.
Sara-Ann says: "There's plenty of Government rhetoric about how it will support families after they've lost their salary via Income Support for Mortgage Interest payments, but very few households are eligible.
"Recommendations to lenders to allow cash-strapped homeowners to defer their mortgage payments or pay interest rather than capital aren't helpful either - all this does is ease the short-term burden of repossession by increasing long term debt. None of these measures tackle the root cause of mortgage arrears, which is an inability to make monthly repayments because of redundancy.
"Whilst they might provide some temporary relief from financial meltdown, these measures do not tackle spiralling debt levels and will not wipe anyone's financial slate clean. It really is a case of 'closing the stable door after the horse has bolted'. "
Payment Protection Insurance, will however, wipe the 'financial slate' clean for up to year, paying a monthly income in the event of accident, sickness or unemployment. Unemployment-only cover premiums with an independent PPI provider, such as British Insurance, are £3.40 per £100 of benefit payout, so a person looking to receive £500 a month to meet mortgage repayments would pay £17 a month.
Sara-Ann believes that if every homeowner took out a Payment Protection Insurance policy alongside their loan, there would be fewer repossessions, lenders would be less likely to incur losses and the Government would not have to use billions of pounds of taxpayers' money to make up the deficit.
She continues: "It's a win, win scenario for all. Banks and building societies insist on customers having buildings insurance so they can recoup losses if any damage occurs to the property they're lending money on, but they're not so keen to protect their fiscal outlay and recoup losses if the homeowner is unable to pay the mortgage.
"PPI gives a financial lifeline to thousands of people whose lives will be torn apart if they lose their homes and is the one proactive measure that will help slow down the increasing numbers of repossessions, reduce the amount of unsold housing stock in our communities and top up lenders coffers."
Despite its benefits, very few homeowners have PPI. According to the Association of British Insurers and Council of Mortgage Lenders, only 22% of new homeowners bought PPI in the first half of 2008 and those continuing their payments dropped to 17%.
Sara-Ann explains: "I suspect this is due to the fact that many people believe redundancy will never happen to them, coupled with the poor reputation of the PPI sector. Its investigation by the Competition Commission has been well-publicised and consumers are wary of lenders who have a point of sale advantage and mis-sell/over-price PPI.
"Also a number of high-profile credit providers have received Financial Services Authority fines for pressurising customers into buying cover they do not want or need and there's been a rapid increase in the number of complaints to the Financial Ombudsman Service - over 25,000 last year.
"However, not all providers should be tarnished with the same brush. Independent firms, who do not link the sale of PPI to the provision of credit, have been found to offer mortgage cover that's four times cheaper than their High street counterparts and often with better benefits and support services."
Given the Chartered Institute of Personnel and Development predicts 600,000 jobs will go in 2009 and the CML says there'll be 75,000 repossessions this year, Sara-Ann is urging the Government to re-think its strategies and take a more proactive approach to help people avoid falling into debt, rather than waiting until it's too late.
She concludes: "The threat of redundancy is real and widespread and no sector is immune. The Government and PPI providers have a responsibility to ensure homeowners have easy access to affordable protection products that will help them in the face of adversity. And let's not stop at mortgages, those renting or in social housing are equally at risk of redundancy and losing their family home, so should have access to the same financial protection."