Low-cost PPI for Low-cost Housing Says Burgess

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Insurers and lenders must broaden their Payment Protection Insurance portfolio and offer policies for people involved in low-cost home ownership schemes says PPI lobbyist Sara-Ann Burgess from specialist firm, Burgesses.

Sara-Ann Burgess, MD Burgesses

I welcome the Mayor's announcement that more housing will be made available to those on lower incomes, but let's do the same with PPI. Whether housing costs are going on a mortgage, rent or a combination of the two, consumers need access to a financial safety net. Insurers must adapt their policies and help everyone keep their homes in times of economic uncertainty.

Insurers and lenders must broaden their Payment Protection Insurance portfolio and offer policies for people involved in low-cost home ownership schemes says PPI lobbyist Sara-Ann Burgess from specialist firm, Burgesses.

Her call coincides with a recent announcement from the Mayor of London, Boris Johnson, who pledged to regenerate five estates in the capital and create 1500 new affordable homes. Tenants will pay subsidised rents for the first six months and then be given the option to buy their property at a discounted price.

Sara-Ann is concerned that very few PPI policies are available for people in low-cost home ownership agreements, despite them being on lower incomes and financially more vulnerable. She comments: "Because housing payments tend to be lower, there's a belief that tenants do not need access to a policy that will pay their monthly commitment - whether rent or rent and mortgage - if they lose their job, become sick or have an accident. However, people in these schemes probably have less spare cash and any savings they would have relied on to carry them through hard times have no doubt gone to lenders who now require greater deposits."

The Council of Mortgage Lenders confirms members require deposits as they believe borrows will have a greater commitment to the undertaking if they've put a stake in, at the beginning. "And this is why," counters Sara-Ann, "that PPI is all the more necessary. Those paying more money up front will have less as a contingency fund so they should have access to low-cost PPI policies to ensure continuation of housing payments if their circumstances change."

According to the Survey of English Housing just over 68% of the population are homeowners - five years ago this figure was 70%. Drivers behind this fall include; shortage of credit, falling house prices and a decline in secure long-term full-time employment. PPI pays benefits for up to a year if redundancy occurs, ensuring stability for both tenant and the Housing Association/developer. This is why Sara-Ann is calling for greater PPI support from lenders.

"The policy address the unemployment issue as it pays bills, relieving the financial pressure on tenants whilst they look for work, plus it reduces lenders' liabilities as borrowers are less likely to default their payments. The CML says reforms are needed to encourage lender participation in these schemes, but I'd like to see PPI added to the reform agenda. The Government-backed Homes and Committee Agency says 20,000 people sign up to low-cost housing schemes every year - I wonder how many realise PPI is available to them?"

In August last year, independent PPI provider, British Insurance was first to launch a shared ownership scheme policy, meeting monthly mortgage and rental payments if a salary is lost.
With low-cost housing schemes set to escalate, Sara-Ann would like to see more insurers follow suit and become more socially responsible.

She concludes: "I welcome the Mayor's announcement that more housing will be made available to those on lower incomes, but let's do the same with PPI. Whether housing costs are going on a mortgage, rent or a combination of the two, consumers need access to a financial safety net. Insurers must adapt their policies and help everyone keep their homes in times of economic uncertainty."

British Insurance charges £3.40 per £100 for unemployment cover, £3.90 for accident, sickness and unemployment protection and £1.90 per £100 for accident and sickness. A monthly premium of £17 would return PPI benefits of £500 a month (unemployment only option).

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