PreBudget Report Unable to Deliver Same Practical Support as PPI Says Burgess



Homeowners worried about meeting their mortgage commitments will take little comfort form Alistair Darling'ss pre-budget report - he'ss failing to provide immediate financial support for those who lose their jobs and postponing, rather than removing the threat of repossession, says Payment Protection Insurance (http://www.britishinsurance.com) lobbyist Sara-Ann Burgess from Burgesses.

Included within the Government'ss proposed measures is an extension of the Support for Mortgage Interest Scheme which helps homeowners by paying the interest on their mortgages when they become unemployed. It used to cover mortgages of up to 's163;100,000 but has now been doubled to 's163;200,000.

However, homeowners cannot claim any benefit until they'sve been unemployed for 13 weeks, which in Sara-Ann'ss opinion, defeats the object: Given that lenders are keen to initiate repossession after one or two missed mortgage payments, a 13 week gap is far too long - and then the payments only cover the interest so it will have little impact on the overall amount owed.

These measures simply pile up debt, and this is further evidenced by the Chancellor'ss call for lenders to defer initiating repossession action for three months of the owner going into mortgage arrears. If the Government'ss benefits don'st start until after 13 weeks, it may be too late for many homeowners who find themselves on the receiving end of repossession orders. This so-called support package is clearly flawed.

The Council of Mortgage Lenders (CML) concedes a three month deferment may only postpone rather than change a lenders decision to seek possession and the housing charity Shelter suggests more needs to be done. It recommends lenders allow homeowners to switch to interest-only mortgages and extend their repayment terms, plus provide options for outstanding debts to be added onto the mortgage and repayment holidays.

Sara-Ann continues: Whilst I applaud any financial initiatives that relieve the pressures on those unable to maintain their monthly mortgage payments, the harsh reality is that the debt will still have to be paid. There is another alternative - PPI. This cover pays more than just the monthly interest, it meets the cost of the whole of the loan and interest for up to year if you lose your job, and the payments are from day one.

PPI cover is sold per 's163;100 of benefit and purchasers can opt for unemployment or accident and sickness cover, or all three. The premiums are not sky-high as many lenders would have you believe, independent firm, British Insurance (http://www.britishinsurance.com), charges 's163;3.40 per 's163;100 for unemployment, 's163;3.90 per 's163;100 for accident, sickness and unemployment and 's163;1.90 per 's163;100 for accident and sickness.

The Government also proposes a mortgage rescue scheme where it buys back the home and rents it out to the former owners, or buys a proportion of the equity. Sara-Ann concludes: I'sm not sure I'sd want to be paying rent to the Government or allowing it to have a stake in my property.

As the CML says 'ssupporting the income of householders in difficulty is just as important as giving people a three month amnesty on repossession's.

PPI provides vital and immediate financial support - an unemployment-only premium of 's163;20.40 per month buys a monthly benefit of 's163;600, or up to 's163;7,200 a year. I don'st know of any other 'ssupport's mechanism offering a comparable return. I wonder if the Government was referring to PPI, rather than itself when it called its pre-budget report 'sFacing Global Challengers: Supporting people through difficult times's





PreBudget Report Unable to Deliver Same Practical Support as PPI Says Burgess