Homebuyer Protection Plan

Standrews_2

I was just wondering .... When we purchased our first house back in 2000 we went to a mortgage broker - The Mortgage Point.

The Mortgage point arranged our mortgage with Abbey National, but as part of that agreement we had to take out life and critical illness protection with Friends Provident for a minimum of 4 years.

I did try to cancel this a few years later before the four years were up, when we moved our mortgage to HSBC but we were told if we cancelled it there would be substantial penalties (I can not remember the figures - i think it was 5% of the mortgage).

The policies are still live.

Do you know if this is acceptable, I know its not PPI but all the talk and constant calls we keep getting about PPI it just makes me wonder.

Many thanks

[Deleted User]

Standrews wrote: »

I know its not PPI

Now you also know for certain that you have no complaint.

Life and Critical Illness cover is a useful insurance which you give no indication of having been mis-sold and would be unwise to cancel.

dunstonh

but as part of that agreement we had to take out life and critical illness protection with Friends Provident for a minimum of 4 years.

Not an uncommon requirement with mortgage brokers. Allowed and no rules broken there.

I did try to cancel this a few years later before the four years were up, when we moved our mortgage to HSBC but we were told if we cancelled it there would be substantial penalties (I can not remember the figures - i think it was 5% of the mortgage).

I would not be a percentage of the mortgage. It would be the amount of the clawback.

Do you know if this is acceptable,

yes it is.

DollyPops

Hi - after just half watching the MSE programme I found this thread as I too had exactly the same thing with Mortgage Point back in 2002 when I took out my first mortgage. I had to take the same (extremely expensive) critical illness cover to be able to go ahead with the mortgage. It was not optional. At the time I had similar insurance through my employer so it wasn't necessary and MP confirmed it was their commission for finding the mortgage but I couldn't go ahead without it.. I was very young, really wanted to buy the property and so was willing to do anything but in hindsight i could very easily of just gone directly to the Abbey National with no insurance policies needed.

Has something changed in the claim system (since the responses above in 2012) as as Martin did seem to be saying that any insurance associated with a mortgage that was not optional was mis-sold.

Thanks in advance...

dunstonh

I had to take the same (extremely expensive) critical illness cover to be able to go ahead with the mortgage. It was not optional. At the time I had similar insurance through my employer so it wasn't necessary and MP confirmed it was their commission for finding the mortgage but I couldn't go ahead without it.

CIC is not PPI. Plus, it is expensive as it has a high pay out rate on claims.

Has something changed in the claim system (since the responses above in 2012) as as Martin did seem to be saying that any insurance associated with a mortgage that was not optional was mis-sold.

If he said that then he is wrong. More likely a misinterpretation of what he said, or more like that he was focusing on the banks and not brokers. Brokers only account for 1% of PPi complaints and the majority are rejected. Last I heard, the FSCS uphold rate for mortgage brokers was just 5%. Most of those being single premium PPI.

Most lenders did insist upon life assurance until the late 90s (a few went into early 2000s). That was allowed and is still allowed today. However, you rarely see it now on retail mortgages but common on commercial borrowing.

In the 90s to very early 2000s, it was common to see packaged deals where the lender gave special terms if you bought an insurance policy. This was allowed. (technically optional as you could refuse and go on the higher mortgage rate)

Whilst lenders stopped making insurance compulsory, brokers could and still can insist on insurance being taken out to allow them to give free mortgage advice. As long as the insurance is suitable.

As I said, Martin was probably focusing on the banks rather than mortgage brokers. He would be technically correct on banks (barring the things mentioned above). He has said before that he cannot cover every scenario on TV. So, often will go with the majority option.