Having worked with the BBC over the past 18 months on a series of investigations into personal loan and associated payment protection insurance mis- selling allegations, I read Peter Mounty’s article in Mortgage Strategy’s August 1 issue with particular interest.My view is that the only way to remove temptation or abuse as the non-corporate world knows it is to regulate against associating PPI with loans at point of sale – you can sell loans, you can sell insurance, but not at the same time and not together. But given that state assistance is so limited I agree it is in their interest for borrowers to protect mortgage and other loan payment commitments with some form of financial safety net such as mppi. After all, some 700,000 mppi claims were paid in 2003–2004. What I do not agree with is that the bad press is directed at mppi. Rather it is ppi linked with credit cards, unsecured and second charge loans which deservedly attracts such hostile media attention. These loan sources, in terms of overpriced and poor value ppi products systemically mis-sold, are unbelievably exploitative and to external commentators it seems ppi is simply a vehicle for generating enormous and unjustifiable commission revenue rather than primary, transparent and cost-effective financial protection. Let me give an example. Take a white label supermarket 8,000 unsecured personal loan and the associated ASUinsurance. The cost of this (and it is the cheapest among its peers) on a like for like basis is the equivalent to mppi on a 100,000 mortgage – or 300% more expensive than standalone cover from independent providers. Mainstream mppi by comparison is predominantly transparent and good value for money with little evidence of systemic mis-selling, a situation that has much to do with the competitive presence of independent providers and intermediaries. mppi’s misfortune is to be guilty by association. It is therefore particularly disappointing that mppi sales are flat and only about 25% of mortgages are covered. In 2004 new sales were 200,000 down on the previous year which is not good news. As an indication of how skewed this market is, although mortgages account for 85% of consumer borrowing, mppi represents only 17% of consumer spend on ppi. Intermediaries contribute only 25% of sales even though they introduce 70% of new mortgage business so why are penetration levels so low? Borrower inertia, media negativity and broker indifference are all factors but since January 15, there seems to be genuine intermediary awareness that they now operate in a best advice minefield and have potentially much wider exposure to mis-selling issues than banks and white label outlets which enjoy information only status and a less intrusive regulatory regime. Whether or not such concerns are more perception than fact, there does seem to besubstance to claims that there isn’t a level playing field when it comes to selling mppi. This, no doubt, is a significant factor in brokers’ reluctance to increase their activity. This is not an ideal situation and I estimate that brokers, as the market now stands, are missing out on at least 100m in commissions. Also, from a consumer’s perspective, the mppi marketplace needs more competition, not less. The product structure, presentation and strategy should be radically rethought and re-energised to restore consumer confidence and improve penetration levels. Iain MacQueen-Sims is a director at OmniCheK
The Mansfield Building Society has launched a mortgage that has no early repayment charge. The two-year discounted mortgage, available to customersin England and Wales, will be one of the few available on the market that does not incur an early repayment if the customer wishes to repay the mortgage in full or part during the […]
Michael Bolton, managing director of HBOS specialist lending, has branded rumours that he is leaving HBOS as “pure market speculation.”Speculation in the industry is rife that Bolton could soon be joining the Essex-based lender Swift Advances, as chief executive.However, Bolton who was promoted this August from managing director of BM Solutions and Halifax Intermediaries, to […]
Bradford & Bingley has revealed that the average UK borrower would only remortgage if they could save 93 a month. Research from the high street brokers highlights homeowners desire to save money on their monthly repayments, but only if the price is right. With over a quarter of borrowers content to languish on their lenders […]
Britannia is cutting its Standard Variable Rate with effect from October 1 2005. Britains second largest mutual is reducing its current 6.35% SVR by 25 basis points. The 6.10% SVR will be available for new and existing borrowers. Tim Franklin, managing director of member business, says: “The reduction will result in savings for our members. […]
Jelf Employee Benefits has released a guide to help employers communicate the recent raft of pension legislation to staff. ‘Your Guide to Pension Freedom’ will help employers meet their duty of care in explaining the changes to employees and in turn will help employees take more control over their pensions and retirement decisions.
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