Along with the rest of the British press, The Independent newspaper on the 5th of February 2009 reported the Bank of England’s decision to slash interest rates still further to an all-time low of just 1%. Provided this cut in the cost of borrowing is passed on to homeowners by their mortgage lenders, this will provide a little light relief in an otherwise depressed housing market. But it could prove short sighted indeed to think that cheaper mortgages should allow homeowners to dispense with mortgage protection insurance.
If there is no income from which to meet the monthly mortgage repayments, of course, it is not going to make a lot of difference whether the amount due has increased or reduced by very much during the past month or so. Without an income to meet the commitment, the accumulation of arrears will represent a potentially huge debt to clear once finances return to normal – unless the mortgage lender is forced to commence repossession proceedings for the home itself in the meantime, of course.
Repossession is the homeowner’s worst nightmare, of course. Yet it is increasing at an alarming rate. According to a report in the daily Telegraph newspaper on the 22nd of January 2009, repossessions have doubled in the past year and the Council of Mortgage Lender’s has warned that some 75,000 can be expected during the course of this year. This is the equivalent of one repossession every seven minutes. The Council had earlier estimated that some half a million homeowners would fall into arrears of three months or more during the course of 2009.
With such startling statistics abounding, therefore, this would appear to be no time to be abandoning mortgage protection insurance. Arrears with mortgage repayments and repossessions, too, most commonly follow on from a period in which the homeowner has found his or her normally steady income disrupted. Such an interruption can from an accident or an illness that keeps the individual off work for several months or it might be the result of one of the ever growing number of redundancies currently decimating the economy.
In any of those events, mortgage protection insurance will ensure that the mortgage repayments are maintained. The benefits from the cover can be enough to meet the repayments in full or just a proportion of them, depending on the level of premiums bought at the outset. Most insurers will typically arrange maximum cover up to an equivalent of 50% of the policy holder’s normally earned income, or £1,500 a month, whichever is less (although these limits will of course vary from policy to policy and insurer to insurer).
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