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Around Half Of The 20 Million Loan Insurance And Mortgage Insurance Policies In The UK Could Have Been Mis-sold

There are around 20 million loan insurance and mortgage insurance policies in the UK and it is thought that around half of these could have been mis-sold. The mis-selling scandal came to the publics attention in 2005 when it both the Office of Fair Trading and the Financial Services Authority started investigations in to the sector. Fines were subsequently handed out to several well known high street lenders and providers of payment protection insurance (PPI).

The majority of those who received fines were high street lenders who were pushing the cover alongside a loan or credit card while giving out very little information regarding the exclusions. This meant the consumer was buying a product they did not understand.

However, it is important to realize that it is the poor selling techniques and lack of knowledge those selling loan payment protection insurance that have caused the problems with loan cover and not the actual policy itself. When bought correctly with the exclusions in mind loan protection can work the way it is designed to do and can give a financial lifeline to those with a lost income.

The Financial Services Authority set out guidelines and recommendations for providers to follow which it was hoped would put an end to the mis-selling. While some have followed these guidelines, the Financial Services Authority (FSA) announced that they have investigated over 4,000 cases of mis-selling in 2007 which was double the amount of the year previous. This clearly means that much more has to be done if faith in the products is to be restored.

Providing a policy is suitable for your circumstances then the cover would begin to payout once you had been out of work for a pre-determined amount of time which is usually between 31 and 90 days. Once the policy has begun to payout then it would continue to do so for between 12 and 24 months again depending on the provider. Loan insurance can be a very valuable lifeline to have because getting behind on the repayments means at the very least earning yourself a bad credit rating which can take years to remedy.

You do need to look out for the exclusions within the cover. Some of the most common exclusions include working part time employment, suffering an illness which is ongoing or if you are of retirement age. There can be others depending on the provider so it is essential that you do read the key facts of the policy before you buy it.

One of the changes in the pipeline when it comes to the way that all payment protection insurance policies are sold is the introduction of comparison tables by the FSA. The tables will highlight the exclusions in a policy and will also tell the consumer how much the cover would cost. To help the consumer choose between which type of payment protection insurance would be most suitable for their needs there will be a serious of questions which will lead to the correct solution and the individual getting the cover which best suits their circumstances.

More than half of all borrowers use a broker to arrange their mortgage. But how do you go about finding one? Should you be paying any fees for their services and how do they work?

#1 There are literally thousands of mortgage brokers in the UK – well over 10,000! These mortgage brokers will range from large companies with nationwide coverage through to the small one-man bands covering their local area.

These different companies may use the full range of advertising media to attract your attention such as the internet, newspapers, magazines, radio, television and yellow pages.

Should you prefer to use a local broker, you can get a shortlist of three financial advisers in your area from Independent Financial Promotions (IFAP) You can also look online at the numerous directories of mortgage brokers online to find one that best suits you.

#2 Whenever you have dealings with a mortgage broker, ensure that you find out whether they are authorised by the Financial Services Authority, either directly or as an appointed representative/principle of another company. Regulated brokers are listed on the FSA website: fsa.gov.uk

#3 Many mortgage brokers will have access to literally thousands of different lenders and products – this can be hugely beneficial when shopping around. It should be the aim of all mortgage brokers to source the market in order to achieve the best deal for you. Beware however, not every mortgage broker will be as ethical as the next – make sure you do your research!

If you wish to find out which lenders a mortgage broker has access to on their panel, you simply have to ask them. Brokers will either charge you a flat fee for their services, or charge you nothing whilst receiving a commission from the lender, or of course, a combination of the both. They are legally bound to disclose details of the commission they receive including the figure if this is more than 250.00.

#4 Mortgage advice is regulated by the Financial Services Authority. Individuals who give mortgage advice must be professionally qualified.

#5 If you are looking for advice on other financial products, for example on pensions, investments and insurance, be aware that these areas are also regulated by the FSA – your mortgage adviser may not be qualified to give advice on these areas. Unlike mortgages, advisers dealing in investment products have to be either tied to one provider or an independent financial adviser who can source the whole of market.

#6 The mortgage industry is packed full of confusing words that you may never heard of before – Do not be afraid to ask any questions. If you are not completely sure what you are getting into or signing up to, it is vitally important that make sure every detail is explained fully by your broker or lender. A mortgage is a huge commitment so make sure that you know exactly what is entailed.

#7 Using the services of a mortgage broker can offer many different benefits to the borrower. If your mortgage requirements are specialised, a broker can sometimes access specialist lenders that may not be directly available to the public. Having a damaged credit history can mean that can that applying for a mortgage can be a little more troublesome via the conventional routes.

#8 As a first time buyer the prospect of using a mortgage broker can be very appealing – even if your needs are very simple. Buying a home and arranging a mortgage for the first time can be a daunting prospect and having a point of contact available can make the process run more smoothly.

#9 It is important to be as honest and accurate as possible when applying for a mortgage. In todays market of high house prices, it can be very tempting to inflate your income or downplay your debts and other financial commitments. It is in fact a fraudulent offence to lie about your income on a mortgage application form.

#10 If you have a problem with your broker or have reason for complaint, it is necessary for both yourself and the broker involved to meet a satisfactory conclusion. Once this avenue has been exhausted, you may take your complaint to the Financial Ombudsman service. It may be possible to claim compensation from the broker in question via the Ombudsman service.