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Lenders attack plan for compulsory insurance

The Council of Mortgage Lenders has hit out at the Joseph Rowntree Foundation’s proposal for compulsory mortgage insurance.

It has written to Treasury Economic Secretary Kitty Ussher, warning that the proposal would increase the cost of mortgages when most people would not need to claim. It says the move could create a perverse disincentive for borrowers to resolve their problems.

In another letter to Ussher, written in conjunction with Shelter and the Citizens Advice Bureau on income support for mortgage interest, the CML says it believes a review of state support is overdue. It says there are a number of areas where the current system appears to disadvantage homeowners compared with tenants.

The letter calls for a review of the waiting period before the initial claim or payment. Payments are normally made only after nine months, by when the lender will have started possession proceedings or the borrower’s home may have already been possessed.

It suggests the £100,000 mortgage limit should be changed to reflect market values and says if the limit had been indexed in line with the retail prices index, it would now stand at £142,000.

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