For the first time in over 15 years, UK consumers are being forced to deal with both falling house prices and widespread job losses and the latest jump in repossessions shows just how difficult many are finding it to maintain their status quo.

According to Sara-Ann Burgess, director at payment protection insurance specialist Burgesses, it is not since the early nineties that a faltering labour market has combined with a plummeting housing market to create an impossible situation for many borrowers.

“Since negotiating the problems of the early nineties, there has always been either good employment prospects or rising house prices to help borrowers deal with any problems they faced. Now both crutches been taken away a huge amount of ordinary people are going to struggle.”

Should redundancy force borrowers to sell up, falling house prices may leave them in a position of negative equity, giving them nowhere to turn. Equally those who have been used to withdrawing equity from their property and taking advantage of low interest rates are finding there is no more capital left to squeeze out of their property.

Burgess commented: “The latest figures from the FSA show that repossessions in quarter two of this year were up by 71% on the previous year. People simply have nowhere to go if they get into trouble now that house prices are falling and a growing number of people are being made redundant.”

Burgess urged borrowers to reassess their need for protection insurance in the light of the deteriorating environment.

“I think people now realise they are not as secure as they were in the past but are perhaps wary of what the protection market can offer them. Seeking out independent providers such as British Insurance will help them get low cost, high quality cover that puts a safety net in place for their family.”

In a changing environment, Burgess said it was important borrowers were also prepared to change their own approach to their finances and tailor it to best serve the long terms needs of both themselves and their families.

Payment protection insurance could prove to be Achilles heel of the government’s expensive bail-out of Britain’s banks.

The taxpayer now has a stake in HBOS/Lloyds, Royal Bank of Scotland and Northern Rock following the government’s multi billion pound move to recapitalise the banks.

However a conflict of interest has since emerged with the government eager to do the best for the public purse but at the same time supporting the clampdown on one of lenders’ most profitable income sources – payment protection insurance.

Bank executives have stressed they will continue to run their operations on a commercial basis, without direct government control.

But Sara Burgess, the managing director of independent payment protection specialist Burgesses, believes this stance immediately throws the banks and the government into conflict.

“At a time when banks desperately need capital they will be looking to their most profitable products to shore up their positions. Few are more profitable than PPI – a market worth some £5bn – and I can see them continuing to actively mine this important income stream,” she said.

For years, banks and shops flogged PPI alongside personal loans, credit cards and store cards. Frequently customers have been unaware that they were paying premiums for this insurance because it was included with their repayments.

Permitting banks and others to continue this practice would place them in contradiction of the latest Financial Services Authority (FSA) guidelines where firms were told to consider stopping selling single-premium policies alongside loans.

Mortgage bank Alliance & Leicester was recently fined £7million by the FSA for mis-selling these policies between January 2005 and December 2007.

New fears have now arisen that thousands of consumers are being denied compensation for mis-sold PPI with demands that the City watchdog becomes involved.

Responsible independent PPI providers such as British Insurance have been banging on about the discrepancies in premium and cover terms between the policies they sell and those pushed by unscrupulous lenders.

As far back as 1999 the award-winning PPI provider was warning that lenders were employing dubious selling practices to sell over-priced PPI policies. The Office of Fair Trading and the Competition Commission (CC) subsequently launched an investigation.

Earlier this month (October) the CC published its provisional findings on PPI where it highlighted the lack of competition between providers on price and other factors, limited ability for customers to search for alternatives or switch products and a considerable point-of-sale advantage for the providers.

”It is abundantly clear that the government cannot operate under its stated policy of conducting its banking shareholdings at arm’s length. It finds itself in a very difficult position,” adds Burgess.

“At a time when the fear of unemployment is driving a surge in the popularity of this product the government needs to forcibly come out and make consumers aware that it is possible to shop around for cheaper PPI insurance than that normally offered by the lender.

“This is especially true now that the Government holds major stakes in some high street banks. To do otherwise would leave it open to the charge that it is actively engaged in peddling rip-off insurance policies to its own taxpayers.”

Mortgage brokers have been urged to return to old-fashioned broking values in a bid to protect clients, by Sara-Ann Burgess, a high profile payment protection insurance (PPI) campaigner.

The last year has seen mortgage volumes and values collapse in spectacular style and brokers can no longer expect business to walk through their door.

For those brokers that want to remain in the market in the long term and continue to provide a valuable and effective service to clients, Burgess says it will be necessary for many firms to re-evaluate the way they operate and the level of contact they have with clients.

“Many mortgage brokers had got used to business flooding through their door and in the face of such demand, keeping in contact with clients and offering them additional services was not the priority.”

However now the stream of new business is so weak, Burgess said those brokers that were able to mine their existing database of clients and help them adapt to the changing financial environment would be best placed to see out the downturn.

“Unemployment is on the rise and many borrowers who had not considered PPI necessary may well feel differently about putting protection in place. Brokers should be contacting all of the clients they have worked with in recent years and offering them a review of their situation and help with putting protection in place,” said Burgess.

Even for clients that have PPI in place, Burgess said it was likely that many could be paying less for their policy or could secure more flexible and effective cover by changing provider.

Independent Intermediaries like British Insurance have shown the huge difference in price between the cheapest and most expensive policies in the market, but still too many consumers are paying over the odds.

“There is a great opportunity,” claimed Burgess, “For brokers to get in touch with clients, reassess their protection needs and perhaps pick up some remortgage business as well.”

The government proposal to return sale-and-rent-back companies to regulatory control has been welcomed by Burgesses.

The independent payment protection specialist believes that these firms have been responsible for causing heartache for vulnerable homeowners nationwide.

“The modus operandi of these companies amounts to little more than legalised robbery,” blasted Managing Director Sara-Ann Burgess.

“People that face losing their home are put under enormous pressure to sell it to one of these firms who then rent it back to the struggling homeowner. However the owner is often only paid a fraction of the worth of their property.

“At the same time many tenancies are only guaranteed for only six to twelve months leading to early evictions. By signing up to a sale-and-rent-back scheme the homeowner believed they were securing the property over their heads. The truth is that many were only postponing an inevitable eviction.”

The government move follows a damning report by the Office of Fair Trading that urged urgent regulation to protect consumers.

But Burgess believes that every mortgagor should be formally informed about the existence of mortgage payment protection insurance (MPPI) when they sign up to the loan.

“If there was a statutory duty placed upon lenders and brokers to inform clients about MPPI, and even actively encouraging its purchase, then this would act as a safeguard to many homeowners when times get tough,” she said.

“Such an initiative would also see the parasitic sale-and-rent-back sector shrink into insignificance.”

Forty five thousand homes are expected to be repossessed by the end of this year. The numbers of repossessions are already up by 50 per cent on last year.

Independent Payment Protection Insurance (PPI) provider Burgesses has warned policyholders against cancelling cover to save pennies as the credit crunch bites.

Managing Director Sara-Ann Burgess said: “Cancelling policies in these economically trying times is a false economy and could be the biggest error that anyone could make. This is especially true when we consider homeowners that might be considering forgoing their mortgage payment protection insurance (MPPI) payments.

“While the policyholder might be feeling confident about their immediate job prospects, and could do with the extra cash at a time of rising prices, the economy is moving into a period that will be as bleak as the recession of the early 1980s when thousands of businesses went to the wall. At the same time, no one knows when they might be struck down with a serious illness rendering them unable to work and unable to make mortgage repayments. Regular premium MPPI, bought from an independent broker, provides affordable cover. And what price can be placed on peace of mind?”

However, Burgess recommends homeowners review their MPPI insurance if it was arranged through their lender.

“Insurance arranged by the lender is invariably always more expensive than being bought through a broker. Shopping around is the most important thing to do when looking for insurance and great deals can be found online. Certainly, inexpensive cover can be purchased from reputable outlets such as British Insurance.

“Buildings and Contents is another essential cover and should not be abandoned. Any incident, such as storm damage, fire or freak flooding could wipe out what is for most people their most valuable asset. Although buildings insurance is compulsory if you have a mortgage, you are not obliged to buy it from your mortgage lender. As always, if you shop around, you should be able to get it cheaper.”

Burgess added that students that have just started or recently returned to university should ensure their contents are covered also.

“A recent study* suggested that students take an average of £1,650 worth of possessions with them. This may be computers, text books, clothing, MP3 players and electrical gadgets.

“This represents a very attractive haul for thieves and this risk of theft is likely to increase as unemployment rises.

“It may be possible in some cases that the parents’ buildings and insurance policy will cover some of their children’s goods so homeowners should always check with their provider.”

In consulting with the market over proposed changes to the payment protection insurance (PPI) market, the Competition Commission must not let its final ruling be hijacked.

Campaigning for a fairer PPI market, Sara-Ann Burgess, director at PPI specialist Burgesses, says: “At the moment there are a lot of providers offering very spurious explanations of why they continue to charge single premiums, why they refuse to give pro rata rebates and why cutting the cost of PPI would increase the cost of available credit.”

The Competition Commission has asked for further information from the market before making its final recommendations, and Burgess said it was imperative that a disproportional weight was not given to the comments of those firms that clearly had huge interests in keeping single premiums in place and refusing to rebate consumers on a pro rata basis.

Single premium policies have never stood up to scrutiny, according to Burgess. “They are inflexible, carry unfair terms and the premium paid accrues interest. There has only ever been one winner in this market and it is not the consumer.”

Burgess said it was essential the Competition Commission did not allow itself to be inappropriately swayed by claims made by single premium providers that simply did not stack up and was delighted that some of their initial claims had already been debunked.

“The Commission has said that providers were overstating the case when they said they had significant front end costs to pay in personal loan PPI policies. It has also found that if consumers shop around they can prevent providers from penalizing them if they choose not to take out PPI. I hope the Commission refuses to let itself be hoodwinked as to the realities in this market and takes bold steps to make PPI work as it could and as it should.”

The fact that a growing number of independent providers are offering low cost, flexible products that many of the established providers are struggling to match shows there is a real appetite to give consumers a good deal.

“Firms like British Insurance have shown that PPI does not have to be expensive, complicated or confusing. The Competition Commission must be bold enough to open up the market and allow these players a chance to compete properly against an established guard that has consistently let its customers down,” said Burgess.

The recent unemployment figures are a sobering reminder to those drawing a salary of the need to protect their monthly outgoings in case redundancy strikes, warns Payment Protection Insurance lobbyist Sara-Ann Burgess from Burgesses.

Unemployment figures for the three months up to August this year jumped by 164,000 – the biggest rise in 17 years. There are currently 1.79m people out of work and it was initially predicted this figure could top two million by next year. However, some pundits now say it could spiral to three million.

Sara-Ann comments: “Whatever the predictions, these are real people with real issues facing stressful times. Those who do not have the financial safety net of Payment Protection Insurance – a policy that pays claimants an income in the event of an accident, sickness or unemployment – are at risk of getting further into debt. Everyone who is currently employed must consider this form of financial protection, whether it’s to cover the cost of a mortgage, credit card, loan or to provide a general income.”

Forecasters have already placed the UK’s economy firmly in recession and it’s feared that redundancies experienced in the financial services, construction and manufacturing sectors will spread elsewhere.

Sara-Ann continues: “Whilst many consider PPI to be a rip-off, this is certainly not the case when the product is properly sold and premiums are not over-inflated. Although some High Street lenders have been found guilty of mis-selling and charging over the odds for cover in a bid to boost their profits, consumers should not tar all PPI providers with the same brush.

“Comprehensive, good quality policies at a fraction of the price quoted by banks and building societies can be sourced from independent online providers who have fewer overheads and take less profit.”

PPI is sold per £100 of benefit and purchasers can opt for unemployment or accident and sickness cover or all three. Independent firm, British Insurance charges £3.40 per £100 for unemployment, £3.90 per £100 for accident, sickness and unemployment and £1.90 per £100 for accident and sickness. A consumer with £600 of monthly outgoings, opting for unemployment cover, would pay £20.40 per month. If redundancy did occur, the financial cushion with British Insurance could last up to a year.

The firm also offers a ‘back to work’ support service helping claimants with job seeking, CV preparation and interview techniques, plus access to a job vacancy database that’s updated daily.

Sara-Ann concludes: “Given the TUC has warned there is no assumption that people who are losing their jobs will find it easy to get new ones, I’d be keen to invest in a policy that allows some financial breathing space. One national paper even predicted that the next two years could be amongst the worst Britain has experienced since 1945! It’s a financial war out there and consumers need to combat this with payment protection.”

The sharp rise in the rate of unemployment means homeowners need to seek urgent protection to ensure they keep the roof over their heads, warns payment protection specialist Burgesses.

Unemployment is rising at its fastest rate for 17 years with the total number of jobless increasing by 164,000 during the last quarter to reach 1.79m, as new figures released on Wednesday show. It is predicted that two million people could be jobless by the end of the year.

“The employment outlook is increasingly gloomy with the credit crunch now rippling through the real economy. People have every right to be worried about whether or not they will have a job next year,” said Managing Director Sara-Ann Burgess.

“The surge in numbers out of work is the biggest since the UK was last entering a recession in the early 90s. This is a situation that can only get worse before it gets better and unemployment is very likely to rise much further since these latest figures predate the financial turmoil of recent days and weeks.

“But by acting now and taking out mortgage payment protection insurance (MPPI), people can at least be secure in the knowledge that should the worst happen and they find themselves without a job they still have the family home.”

The warning comes as the Council of Mortgage Lenders (CML) was this week taken to task by the Treasury Committee who accused it of not doing enough to prevent repossessions, even encouraging them as a matter of policy.

“This is one of those occasions where you can buy peace of mind – and it comes relatively cheaply. The alternative is simply too traumatic to contemplate especially in the current climate where lenders are quick to serve repossession papers as they need all the cash they get from selling their properties at auction to shore up their eroded capital solvency positions,” Burgess added.

She particularly advises those currently working in the financial services sector to act quickly if they do not already have this cover in place.

“We are all aware of the difficulties this sector is currently facing and the CBI expects that 12,000 or more jobs will be cut in the financial industries over the next quarter. This is not the only sector that is set to suffer, but it is the one that is under the most immediate pressure.”

Indeed, another recent survey by the CBI revealed rapidly deteriorating conditions in manufacturing with confidence here tumbling to its lowest level in seven years as orders fall away. The number of job vacancies also fell by 40,000 to 608,000. The biggest fall in job opportunities was in the construction sector where vacancies in the three months to the end of September were almost 27 per cent lower than a year earlier.

Vacancies in finance and business on the same basis were almost 17 per cent lower, and more than 21 per cent lower in transport and communications.

A recent report revealing that house repossession is rated as the event most likely to cause mental health problems should come as no surprise, comments Payment Protection Insurance lobbyist Sara-Ann Burgess from Burgesses.

The issue was raised in May by independent PPI provider British Insurance who warned lenders that their continuous seizure of properties from thousands of homeowners was contributing to escalating stress levels.

Mental health charity Rethink says that rising repossessions could damage the mental health of almost half the country following a survey that found 46% of 2000 respondents cited repossession as their main concern.

Rethink called for urgent action to prevent a mental health disaster as it believes a build-up of stress and worry of arrears can be enough to harm a person’s mental well-being.

A view shared by Sara-Ann who says: “Calls have frequently been made for more to be done to bail out consumers financially and reduce the number of potential stress-related illnesses, but judging from the latest mortgage arrears and repossession figures this appears to be falling on deaf ears.”

Statistics from the Council of Mortgage Lenders show that in the first half of this year there were 155,600 homeowners with mortgage arrears of three months or more and it’s predicted this figure will rise to 170,000 by the end of 2008.

The Ministry of Justice reports that the number of court orders for repossessions rose to 28,568 for the three months to the end of June – the highest for 16 years – and the CML suggests this will increase to 45,000 by the year end.

Sara-Ann continues: “PPI providers with a conscience, such as British Insurance, have lobbied long and hard for lenders to recognise the emotional implications of the credit crunch. Repossessions are more than a financial sacrifice - people are losing their homes and livelihoods, relationships are suffering and families are being uprooted and taken away from their daily routines.”

When British Insurance highlighted this issue a few months ago, the firm suggested that the 530,000 people* who yearly seek medical advice for work-related stress was the tip of the iceberg. It called for consumers to take out some form of payment protection cover to ensure they can meet their monthly financial commitments should accident, sickness or unemployment occur and alleviate the pressure.

Sara-Ann concludes: “A key contributor to payment failure and home repossession is redundancy and sickness, so to protect themselves consumers either have to cover their payments privately through insurance or risk no financial safety net at all.

“Those suffering from stress as a result of this credit crunch will undoubtedly increase and we all have a part to play in helping consumers cope during these difficult financial times. Providers must follow the lead of British Insurance and cover this condition and honour claims from people who develop mental health problems after taking out a policy. It could help avert a mental health disaster.”

News that home builders will be giving customers greater levels of protection via a Code of Conduct and redress scheme is to be applauded, says Payment Protection Insurance lobbyist Sara-Ann Burgess from Burgesses.

She comments: “It’s great dissatisfied consumers will get their complaints dealt with when they first move into their new homes, however, it’s a pity little is being done to protect those who purchase PPI in a bid to keep these homes. We know in many cases PPI is over-priced and mis-sold and yet these practices are allowed to continue.”

The PPI sector has been under investigation by the Competition Commission since February 2007, following a referral from the Office of Fair Trading who voiced concerns after receiving a ‘super complaint’ from the Citizens Advice Bureau In September 2005.

Sara-Ann continues: “Despite findings that clearly evidence elements within this sector are working to the detriment of consumers, three years on from the initial complaint, no immediate action has been taken. The Competition Commission recognises that banks and building societies have a monopoly and as a result charge excessive premiums and sell a high volume of policies to consumers who are then illegible to claim, so why does it take so long to issue statutory guidelines that will address these issues? The home building sector has taken on board the OFT’s comments and sourced a solution so why can’t PPI providers do the same?”

An OFT market study into home building in the UK was launched in June 2007 and following a series of investigations, found that many buyers had faults with properties or delays moving in. It concluded homeowners suffered significant detriment, distress and inconvenience if there were major faults or several problems with a property, especially if related to heating or plumbing.

As a result, bodies including the Home Builders Federation, the National house Building Council and the Council of Mortgage Lenders are launching a Code of Conduct and scheme to give dissatisfied customers redress, ensuring they can get problems fixed quickly with minimum disruption. If this is unsuccessful, the OFT will introduce a statutory system, paid for by the house building industry.

Sara-Ann concludes: “If only we could do the same with PPI. It’s ironic that the words used to describe the impact of home builders’ mistakes – detriment and distress – were the same ones used by the OFT in its market study into the PPI sector. Solutions have been found to reduce the detriment and distress when consumers first purchase their homes, but not when they buy PPI.

“Customers need better protection across the board, before, during and after they purchase their properties. At the moment it’s left to PPI independents such as British Insurance to safeguard consumers’ interests and provide affordable, high quality products that cater for those with mortgages or who are in shared ownership schemes. When properly sold, PPI is an invaluable financial safety net and will pay bills should accident, sickness or unemployment occur.”

The Competition Commission has set a statutory deadline of 6 February 2009 for the implementation of any remedial measures it decides are necessary following its investigation into the PPI sector.