Whilst I agree these measures will temporarily give homeowners some much-needed financial breathing space, they won't be able to escape the fact that their debts will still be piling up. It's a bit like the 'finger in the dike' scenario; you can only keep the water at bay for so long.
Braintree, Essex (PRWEB) December 3, 2008
Government recommendations that lenders should extend the length of mortgages or accept interest-only payments from borrowers in difficulty serves only to prolong customers' financial crises, says Payment Protection Insurance lobbyist, Sara-Ann Burgess.
She comments: "Whilst I agree these measures will temporarily give homeowners some much-needed financial breathing space, they won't be able to escape the fact that their debts will still be piling up. It's a bit like the 'finger in the dike' scenario; you can only keep the water at bay for so long."
Sara-Ann believes homeowners should be sourcing a low-cost payment protection solution in order to continue mortgage payments and meet other financial commitments should they lose their job, rather than rely on lenders treating them fairly.
"We know from past experience and the thousands of complaints flooding into the Financial Ombudsman Service that consumers get the raw end of the deal. Consumers must empower themselves and not rely on the goodwill of their mortgage provider.
"Payment protection insurance allows consumers to take control of their financial situation as it offers a tangible benefit, in the form of a monthly income, should unemployment occur. There's nothing else available that matches this financial safety net - it clears the monthly debts for up to a year, instead of chipping away at a miniscule mortgage amount and leaving this, plus other bills to grow."
Figures recently released by campaign group, the Life Trust Foundation, suggests 700,000 homeowners expect to miss a mortgage repayment next year and the most fearful age group, 35-44, are more likely to have young children and a large mortgage.
Sara-Ann continues: "Their greatest fear is unemployment so why not allay those fears and protect against it. PPI will cover the mortgage and fundamentals such as council tax, utility and food bills."
Alongside recommending measures to manage arrears, the Government is increasing its benefits package in January, offering support to those with mortgages up to £200,000 and paying some or all mortgage interest after three months of unemployment.
"This," counters Sara-Ann, "is a limited benefit on offer to the minority. Very few of those 700,000 homeowners anxious about their mortgage repayments will qualify for these state handouts. Only those eligible for specific income-related benefits will be able to claim Support for Mortgage Interest and then only after 13 weeks. PPI, however, offers back to day one cover and is guaranteed."
The issue of lenders' continuing goodwill has been raised by the Council of Mortgage Lenders as the debate about how long a lender should extend forbearance to a borrower in difficulty intensifies.
It says: "In a large number of cases, borrowers are already able to remain in their home for six months or longer while they work with the lender on implementing a plan to pay off their arrears. But in cases where there is little or no equity in the property - and no chance of the borrower getting back on his feet in a short period - it may be in the best interests of the homeowner to move towards selling the property, rather than allowing arrears to continue to build up over a long period."
As house prices continue to plummet, Sara-Ann is concerned, that even this option will fail to alleviate the problem: "We know the housing market is not going to make a swift recovery - the Land Registry reports a 10.1% decline in house prices in England and Wales in October and the average house price is now £165,529. A sale will not address the financial crisis, it will only leave people worse off with no home and a pile of debt."
She concludes: "More than 180,000 people have been made redundant in the last year so it makes sense to protect against unemployment with PPI. Then homeowners won't have the headache of working out arrears management plans with lenders or face the prospect of repossession/selling their home. Neither will they have to chance it with a state bailout. "
PPI can be sourced very competitively. Independent provider, British Insurance, charges £3.40 per £100 for unemployment cover, £3.90 per £100 for accident, sickness and unemployment and £1.90 per £100 for accident and sickness. It recently scooped a series of awards from magazines and websites for its products, services and for treating customers fairly.