The government’s recent announcement that it will enable homeowners to put off their interest payments on their mortgage for up to two years in an effort to prevent the number of repossessions increasing may convince some people that they do not need to bother with mortgage payment protection insurance (MPPI) at all.

However, according to many consumer champions, MPPI will protect homeowners much better than the government scheme will.

More details of the scheme were announced last week, including criteria that the homeowner must fulfil such as not having more than £16,000 in savings.

MPPI starts paying out after a period of either 30 or 60 days of stopping working and pay out for a limited term, usually 12 months.  The money does not have to be repaid and although MPPI is usually taken out when you take out your mortgage, it can be started at any time and many mortgage advisors and PPI providers have reported an increase in the number of policies being started at the moment as people become nervous about their job security.

Vera Cottrell, personal finance campaigner at consumer organisation Which?, says anyone with an MPPI policy should think very carefully before cancelling it. “For homeowners who lose their jobs, the government’s new scheme looks like it will only delay interest payments for two years, at the end of which time you’ll either have to pay more or for longer. MPPI, on the other hand, will not only pay the interest for you for a year or more, but will also pay any capital repayments you make as well. So, if you do lose your job, you’ll be significantly better-off with MPPI than under the government scheme.”

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