Homeowners willing to take drastic steps to keep their properties
Wednesday, 19 August 2009 12:01 PM
Homeowners are willing to take extra measures to ensure they keep their homes but only a few have adequate insurance cover if they lose their job, research published today claims.
Opinium Research carried out an online poll of 2,007 British adults for insurance provider LV=, which found half of homeowners (51 per cent) would take a second job to hold onto their home while four in ten (43 per cent) would withdraw some or all of their life savings to make ends meet. Almost a third (29 per cent) would even be prepared to sell off the family silver.
But only one in ten (9 per cent) said they had adequate insurance to pay their mortgage as well as other household bills over the long term, if they were to lose their job.
One in five homeowners (19 per cent) would be prepared to take in a lodger to help pay the mortgage and almost as many (18 per cent) would rather go cap in hand to friends than give up their property. One in ten (12 per cent) say they would move out and rent their property to someone else, if that was necessary to be able to cling on to ownership.
Although just over a third of homeowners (37 per cent) have some kind of mortgage protection in place, most of them have simple mortgage payment protection insurance (MPPI), which often only covers mortgage payments over the short term. Less than one in ten homeowners (9 per cent) have more comprehensive income protection insurance that could cover their mortgage and other living expenses over the long term not just for a limited period.
Tougher lending conditions have not dented the aspiration among the under 35s to own their own property. Three-quarters (74 per cent) according to the survey can't imagine not buying a home at some stage in their lives.
Reflecting what might be a cultural difference between generations, whereby younger people do not expect to have a job for life, homeowners under the age of 35 tend to opt for some form of income protection in greater numbers with 43 per cent of respondents saying they have some kind of protection for their mortgage payments compared with an average of 37 per cent across all age groups. However, two thirds of younger homeowners (65 per cent) have opted for MPPI cover that often only covers payments for a limited period.
Chris McFarlane, LV= head of protection, said: "It is encouraging to note that younger homeowners are more aware of the need to protect their mortgage payments. But they need to be very clear about what their cover includes and whether the replacement to their regular income would dry up after a short time, as MPPI often does. Protecting a breadwinner's loss of income over the long term now, rather than reacting only when the worst happens, would make just a modest impact on most people's finances, yet it would provide vital assistance if needed."
However, the reluctance of many to take out more complex and ultimately expensive forms of income protection might be understandable. A Competition Commission investigation into the payment protection insurance industry, including MPPI, found there were problems with the sale of protection products whereby there were often sold with a mortgage, loan or credit card at the same time potentially stifflilng competition from outside providers.
It is hoped that this finding will encourage homeowners to shop around before taking expensive products from their mortgage providers. However, many buyers opt for MPPI from their lenders simply because of a lack of alternatives.
Meanwhile the Financial Services Authority (FSA) has announced an investigation into whether insurance providers are treating their customers fairly after it was revealed, that only one insurance provider, Select and Protect, now offered standalone unemployment cover. Every other insurance provider is forcing its customers to take more expensive products that also cover accidents and sickness. Price comparison website moneysupermarket.com last week also revealed that MPPI premiums had increased by between 20 and 100 per cent in the last year.
And it has also been claimed that premiums are set to increase again while insurance providers are also offering reduced cover. According to a report in the Times last week, insurance providers are reveiwing premiums every three months as the rate of unemployemnt increases.
