You are here: Home - News -

Immaturity of MPPI blamed for product shortfalls

by:
  • 17/06/2003
  • 0
An independent investigation into mortgage payment safety nets has found little to recommend in Mort...

An independent investigation into mortgage payment safety nets has found little to recommend in Mortgage Payment Protection Insurance (MPPI). Paying the mortgage? A systematic literature review of safety nets for homeowners, from the Centre for Housing Policy at York University, found that while 13% of those in mortgage arrears had MPPI, only 1% had made a claim on the policy.

The report put this down to the many circumstances leading to arrears which are not being covered by the insurance, such as relationship break-downs and having to give up work to care for relatives. Karen Croucher, a research fellow at York University and co-author of the report, said: ‘Quite a lot of reasons why people go into arrears on a mortgage are unrelated to the things covered by MPPI. The product does what it says on the box. In case of accident, sickness or unemployment it pays your mortgage for a year, it is not a dishonest product, it is just limited.’

The report noted that there was little relation between perceived or real insecurity and take up of the product, and that between 40% and 50% of mortgagors would get little benefit from MPPI as they have sufficient savings or other household income to cover mortgage payment.

Charles Ansdell, senior technical adviser at intermediary Inter Alliance, pointed out that while MPPI is not comprehensive it has got a lot better over the last two or three years. He said: ‘The product is still young, and it takes time before products are priced efficiently and risks are insured effectively. MPPI is by no means the finished product. Because it is basic insurance and not individually underwritten it has exemptions. It is possible that it will move towards individual underwriting which would make it more inclusive.’

The authors acknowledged the low opinion of MPPI in the eyes of intermediaries, but refused to condemn the product themselves. ‘We, as a team, just looked at the evidence, and there is not a lot of evidence that MPPI is good value for money. However we would be cautious about our conclusions, it works for people some of the time,’ said Croucher.


Tags

There are 0 Comment(s)

You may also be interested in

Business Skills

In this section, we offer short ‘how to’ guides on harder to crack areas of business. From social media, to regulation or niche product areas, we cover it all.

Profiles

Our journalists interview key industry entrepreneurs, strategists and commentators for day-to-day market insight and a strategic view of where the industry is heading. We offer lessons for success and explore the opportunities for your business

Success in Practice

Here, we share case studies fleshing out best practice to help you decide what could work for your business. Take a look at how others approached complex tasks like launching a new mortgage lender, advising on a new product area or deciding to specialise in another. Learn from others mistakes and triumphs.

Marketwatch

Each week, we ask top mortgage and property commentators with a unique perspective to examine a key news headline, market move or regulatory or political issue.

Poll

Vote in our weekly poll here. It’s your chance to tell us what you think and be heard on the top news stories of the week. Review our archive to find out what your industry really thinks and all our coverage of the results.

Top Comments

Be part of the conversation on Mortgage Solutions. We want to hear from you. We have a tool called Disqus to tell us which stories get the most comments each week. Every Friday, the team picks the most thoughtful or opinionated contributions from our readers to enjoy again. Don’t forget to share your favourite stories from the site on social media to keep the conversation going.
Read previous post:
The Mortgage Operation enhances its website

The Mortgage Operation (TMO) has revamped its website, www.mortgageuk.com. The site has separate p...

Close