Lenders Attack Compulsory Mortgage Insurance

Lenders Attack Compulsory Mortgage Insurance

Lenders are attacking proposals for compulsory mortgage insurance.  

The Council of Mortgage Lenders (CML) has hit out at the Joseph Rowntree Foundation’s proposal for compulsory mortgage insurance.  They have written to the Treasury warning that the proposal would increase the cost of mortgages when most people would not need to claim.  

In another letter written to the Treasury in conjunction with Shelter and the Citizens Advice Bureau on income support for mortgage interest, the CML says it believes a review of state support is overdue.  The letter calls for review of the waiting period before the initial claim or payment.  Payments are normally made after nine months, by which time the lender will have started repossession proceedings or the borrowers home may have already been repossessed.  

Our view

Making it compulsory destroys market competition for mortgage and insurance.  Making it a regulatory issue that a lender has to ask a client to positively decline insurance because they have made their own arrangements would be better.  This would be similar to what lenders do now, but in a more formalised way.

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