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Mortgage interest insurance launched
Wednesday, 02 Jul 2008 18:00
Insurer MarketGuard today launched a new policy to protect homeowners against rising interest rates.
The policy is aimed at the 7.5 million people who are on a variable rate mortgage, or due to come to the end of their fixed, from the risk of rising interest rates.
The policies pays out once the Bank of England base rate or a lenders' standard variable rate rises over a certain point, set by the consumer.
Chris Taylor, chief executive of MarketGuard, said: “Today’s borrowers are highly indebted and have massively overstretched to get on the housing ladder. Our research reveals that even the slightest increase in the Bank of England’s interest rate could tip people over the edge.
“Currently there is only one way for individuals to protect themselves from rising interest rates – through a fixed rate mortgage."
If interest rates head over a level set by the customer, MarketGuard pays out the monthly difference.
Communities & Local Government committee chairman, Dr Phyllis Starkey MP, said: “Whilst it is not appropriate for me to comment on a particular commercial product, anything that can help homeowners cope with rising interest rates is to be welcomed.
"It’s encouraging to see the government clearing the way for new types of safety nets that provide more choice for consumers."
Louise Cuming, head of mortgages at moneysupermarket.com, said: "This is a well timed and innovative product that could provide many people with much needed protection and peace of mind. For financially stretched borrowers any protection from heavily increased mortgage outgoings could be crucial.
"However, I suspect the cost of taking out MarketGuard might dissuade many Brits. Families already suffering from the spiralling cost of living are unlikely to want to spend extra money each month, even thought it could save them cash in the long run.
"People should weigh up the cost of the product versus the likelihood of being hit with increased mortgage repayments and work out when they may be better off. This product won't suit everyone, but for those who can't afford to weather further increases to their mortgage payments it is worth considering."