The Government is considering measures to encourage homeowners to take out mortgage payment protecti...
The Government is considering measures to encourage homeowners to take out mortgage payment protection insurance to reduce the burden on the State.
Under plans put forward in its Green Paper, Quality and choice: A decent home for all, options may include extending the waiting period for State benefit help from nine to 14 months to incentivise the take-up of private cover.
Other ideas being suggested in the consultation document include offering benefit help earlier to homeowners who have taken out MPPI but suffer an uninsurable event, and allowing MPPI payments to be given more generous treatment in assessing benefit entitlement.
But the introduction of the measures is dependent on Government satisfaction that the quality and take-up of MPPI is sufficient to enable a better integrated public-private sector approach.
A spokesperson at the Department of Social Security said: "We shall be reviewing the success of the industry initiative to increase take-up of MPPI by 2004 and will consult in more detail on any proposals before implementing them. We aim to ensure more protection for homeowners."
Under the current regime, help is only available after nine months and is linked to income support or income-based Job Seekers Allowance entitlement. It covers the interest-only element of a mortgage and is limited to the first £100,000 of a mortgage. This provides support for people who cannot work but does not cover the capital element of a mortgage.
As soon as a claimant takes up work, their benefit help with mortgage interest payments is ended completely. If people moving into work then lose their jobs they may have to go through a further waiting period before becoming entitled to benefit help again.
But from April 2001 the Government will be extending the linking arrangements for benefit help for those taking but then losing a job up to 52 weeks.
This will enable people who take up work but then lose it within this period to re-claim benefit help with mortgage interest payments without having to wait another nine months, removing the disincentive to claimants taking up casual or seasonal work.
The paper said: "To increase incentives to work and provide more equal treatment between homeowners and those who rent, benefit help with mortgage interest payments will be continued to claimants for a further four weeks after they take up work."
Peter Williams, deputy director-general at the Council of Mortgage Lenders, said: "We have taken forward our own initiative to make home ownership more sustainable by introducing, along with insurers and the Government, MPPI aimed at providing greater support for borrowers who face an unexpected change in their circumstances."
