Why consumers need to shop around for MPPI

There are 24,479,439 homeowners in the UK today*. That means that the 18 million homeowners who have no financial protection could, in effect, face repossession should they become unable to work and therefore unable to service their mortgage repayments through no fault of their own.

“This makes for frightening reading” says Simon Burgess from independent payment protection specialist BritishInsurance.com. “While some homeowners simply not see the benefits of MPPI, I believe that the extortionate pricing of the product by High Street banks and lenders has made the product unaffordable, especially to first time buyers.”

Burgess has always been publicly vocal as to the blatant over pricing of MPPI and the ‘dodgy’ sales practices used in ensnaring customers by lenders. And at last, with industry and consumer bodies such as the Office of Fair Trading, the Citizens Advice Bureau and the The Financial Services Authority seriously looking at the PPI market as a whole, Burgess is hopeful that lenders will start being more ethical.

“Currently, around only 6% of PPI products are bought by consumers from standalone providers such as ourselves. The remaining 94% are bought from the lender at the same time as the mortgage sale.

“Consumers are simply unaware that there are free to shop around for MPPI and other payment protection products and should not be coerced in to buying their lenders’ own, over-priced cover.”

Burgess points out that the average homeowner is paying up to £225 a year more than they have to for their mortgage cover**.

He says: “It is imperative that homeowners shop around for MPPI and that they understand the product thoroughly. MPPI provides cover that you couldn’t put a price on, but that doesn’t mean that you have to pay more for it than you should.”

* Office of National Statistics
** Based on the table below, to protect a £100,000 25-year repayment mortgage with a monthly payment of £500 would cost £5925 or £237 per annum with BritishInsurance. This compares with an average cost from the top ten lenders of £8900 (£356 per annum) or £11550 (£462 per annum) from Cheltenham & Gloucester the most expensive lender. This produces an average saving of £2975 (£119 per annum) or a possible saving of £5625 (£225 per annum).

The details below compare the cost of mortgage protection insurance for a 30 year old.

Provider Rate Per £100
British Insurance £3.95
Bradford & Bingley £4.90
Natwest £5.12
Nationwide £5.89
Halifax £5.94
HSBC £5.95
Woolwich £5.95
Alliance & Leicester £5.95
Barclays £5.95
Abbey £6.04
Cheltenham & Gloucester £7.70

Source: British Insurance –27 November 2006