LibDems Cable Calls For Better Protection For Mortgage Holders

1.38.00pm BST (GMT +0100) Thu 1st Jul 2004

Mortgage payment protection insurance should be offered as standard for all new mortgages, Liberal Democrat Shadow Chancellor Vince Cable said today.

Banks, building societies and other mortgage lenders should offer payment protection insurance as standard practice. Customers should be given the option to 'opt out' only after receiving specific guidance by mortgage advisers on the risks of choosing to remain uninsured. At the same time, the mortgage insurance industry should be properly regulated by Government with safeguards for consumers against overly-expensive or meaningless policies that fail to pay out when people face difficulties.

Dr Cable said: "Mortgage payment protection insurance should be a standard part of any new mortgage contract. It would be in the best interests of consumers in light of continuing uncertainty over the future of the housing market.

"However, many of the insurance policies on the market today are too expensive, contain too many exemptions in the small print, and do not best serve consumers. This insurance industry needs proper regulation and enforcement to honour pay-outs to those in need of help when in difficulty.

"Interest rates are going up, and are expected to keep going up over the next year. There is uncertainty over house prices. Those with mortgages at four, five, six or even seven times their earnings could face payment difficulties.

"In this environment, it should be standard practice for mortgage lenders to offer high quality payment protection insurance to those taking out new mortgages, or indeed to existing customers who wish to take out insurance retrospectively.

"There should also be industry-wide agreement to help those who fall into payment difficulties with flexible mortgage payment arrangements in order to avoid losing their homes, possibly by extending mortgage terms to reduce monthly payments, or re-mortgaging without financial penalties to more favourable rates.

"It is in the industry's interests to prevent a slump in the housing market, and in the Government's interests to regulate mortgage insurance in a way that benefits consumers."