The company says its interest rate insurance is the first product of its kind to get regulatory approval. The cover is available to borrowers on variable-rate and tracker mortgages as well as those in the last three months of fixed deals who face moving on to variable or tracker products.
The policy will pay out if the borrower’s interest rate rises by a fixed percentage above the level of base rate at the time cover is taken out. The fixed margin is determined by the borrower and can be between 1 and 2.5 per cent.
Rates start at around £15 a month for a typical £100,000 repayment mortgage. Claims are calculated automatically and payouts are made into the borrower’s account the same month.
Communities and local government select committee chairman Dr Phyllis Starkey wrote to the Treasury in January to help ensure the product was classified as insurance and therefore exempt from income tax. She says: “It is encouraging to see the Government clearing the way for new safety nets that provide more choice for consumers.”
MarketGuard chief executive officer Chris Taylor says: “Our product will help bring stability to the seven and a half million people who are on a variable-rate mortgage or coming to the end of their fixed rate with no way of remortgaging.”
Hamilton Property finance managing director Robert Gerwat says: “It seems innovative but its value will depend on the difference in cost between variable rates and fixed rates at any given time.”