Homeowners who have taken out mortgage payment protection insurance (MPPI) could be paying up to 33% more than they need to, according to personal finance website, moneynet.
Moneynet has claimed mortgage lenders are taking advantage of borrowers, who often take out MPPI policies alongside a mortgage, but do not realise they could get a more competitive deal elsewhere.
New borrowers are most likely to be affected, according to figures from the Council of Mortgage Lenders.
In 1998, 23% of new mortgages were taken out with MPPI. This figure rose to 36% in 2001 and a total of 2.5 million homeowners now have MPPI.
Richard Brown, managing director of moneynet, said: ‘It is our belief many of the mortgage lenders are taking advantage of people’s ignorance of the fact that they can shop around for their protection cover.’
Moneynet reported there was a significant divergence between the most expensive and the cheapest cover, with Cheltenham & Gloucester coming out as the most expensive.
Brown warned: ‘Just because a mortgage payment protection plan is one of the most expensive it does not mean you are getting a better level of cover. In fact, the only difference in 99% of cases is how much commission goes in the provider’s pocket.’
However, Peter Mounty, head of communications at Cheltenham & Gloucester, refuted the validity of comparative tables such as this.
He said: ‘It is not comparing like with like. Our policy pays the mortgage, but also includes a chunk of money to pay for other items of expenditure. Comparing products like this is too simplistic.’