ROOF Blog

Fears that millions of homeowners could soon be paying a heavier price for rising unemployment have been fuelled by the news that more than 20,000 people have, this month, seen the cost of mortgage payment protection insurance (MPPI) jump by about 20%. Yorkshire building society has pushed up the cost of its mortgage PPI in a move it says will typically add about £46 to the amount borrowers pay each year. The actual increases will vary, depending on the type of policy. The Yorkshire’s new mortgage PPI provider, Cardif Pinnacle, said that the cost of providing this cover ‘has risen to record levels’ following a huge increase in claims, presumably from homeowners losing their jobs.

Around 300,000 people who had hoped to pay off their mortgage this year face shortfalls. They are all victims of missselling of 25 year with-profits endowment policies. Almost three million more people will suffer a similar fate in the next few years, according to the Association of British Insurers. At the peak of the 80s housing boom, homebuyers were encouraged to take interest-only mortgages and rely on investment returns from an endowment to repay the loan at the end of the term, usually 25 years. In the 90s, £50 a month policies regularly turned a £15,000 investment into a £100,000 return.  Today, they commonly pay out less than £30,000 for the same 25-year investment.

The UK industry should develop more products to help builders and property owners make the 5.5 million properties at flood risk in England and Wales more resistant and resilient to flooding, Environment Agency chairman Lord Chris Smith says. Speaking at the National Flood Forum annual conference, Lord Smith also encouraged building merchants and DIY stores to offer advice to builders and members of the public on how to make properties more resilient to floods, so that drying out and cleaning up is faster and cheaper following any flooding. A recent Environment Agency study into the devastating floods of summer 2007 found the average cost per flooded home was between £23,000 and £30,000 and a quarter of homeowners were not fully covered by insurance.

Three weeks after last month’s devastating Cumbria floods, the Environment Agency is urging owners of damaged properties to insist that insurers repair their homes and businesses to be more flood-resilient.

Properties affected by flooding are often simply returned to their previous state, meaning that similar damage is likely if flooding occurs in future.

Repairing a property that has been flooded offers a chance to minimise the damage and disruption that could be caused by any future flood.

The Financial Services Authority has warned a number of insurers have recently increased the premium charged for mortgage payment protection insurance or reduced the level of protection offered, at a time of rising unemployment. The City watchdog said some insurers have increased premiums by between 30 and 50 per cent, while others have cut the maximum monthly payout and increased the waiting period before people can claim from 60 to 90 days.

Nearly one in four people have cancelled their home insurance in a bid to save money during the recession research from the Association of British Insurers found. Around 22 per cent said they had either cancelled or not renewed their home contents cover in the past 12 months, and a further 17 per cent no longer have any cover. People living in Scotland are the most likely to cancel or not renew their cover.

Millions of people who bought insurance to pay their mortgage if they become ill or lose their jobs, are facing rises of up to 40 per cent in their monthly premiums. Insurance companies are blaming the increase on a rising number of claims. Figures from the Association of British Insurers show a 200 per cent increase in claims on mortgage payment protection insurance during the past year, and applications for policies are ‘soaring’.