Proposals for a government-backed mort- gage payment protection insurance scheme have been slammed as inadequate by industry members.
The Sustainable Home Ownership Partnership was proposed in a report published last week by the Joseph Rowntree Foundation as a way to help borrowers safeguard their homes in the event of un- employment, sickness or an accident.
The social policy charity proposes a compulsory 10-month MPPI plan into which the government and lenders would each inject 25% of the funding, with borrowers providing the rest.
The proposal comes as the charity highlights the risk of repossession facing home owners.
It claims that almost 25% more borrowers would face repossession if the economy experiences the lows seen in the early 1990s.
But Ian MacQueen-Sims, director of Omnichek, dismisses the plan as too complicated and insufficient to protect home owners.
He says: “This plan is too bureaucratic and it doesn’t account for couples breaking up – a common cause behind arrears.”
Concerns have also been raised about the compulsory nature of the insurance, which would be built into all mortgages.
Sue Anderson, head of member and external relations at the Council of Mortgage Lenders, says: “While we welcome the report as a contribution to the debate on safety nets for borrowers, we do not see a compulsory product as the way forward.”
Roger Harding, senior policy manager at the JRF, dismisses criticism about the plan being overly bureaucratic as unhelpful, since the report was issued to stimulate debate.
He says: “We’ve suggested that the insurance be compulsory because history shows that voluntary schemes do not work and those who are most vulnerable are least likely to take up mortgage protection.”