By uttering the words `Skipton Building Society', John Major may have started a mortgage revolution

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The Independent Online
Is it possible that John Major unwittingly played a bit part in an unwelcome revolution about to hit mortgage borrowers?

You may recall that about two years ago, he was defending himself against charges of being a skinflint after the government extended to nine months the waiting period before people who lost their jobs could claim mortgage benefits from the state.

Not so, he argued, summoning up the name of Skipton Building Society, which had just launched free unemployment insurance cover to new borrowers, as an example for all other lenders to follow.

Skipton's example stood virtually alone until recently, when Royal Bank of Scotland joined the fray by offering free cover for four years to all new borrowers with mortgages of 95 per cent or less of a home's value.

After four years, unemployment insurance costs pounds 2.84 per pounds 100 of monthly repayments. Fuller cover, which includes accident and sickness, costs pounds 6.03 per pounds 100 of benefits.

RBS's initiative, while welcome, barely scratches the surface of the problem. In the past year or two, a combination of rising house prices and falling unemployment has shielded most people from the traumas of repossessions. All this could change if the economy goes through another downturn as it did earlier this decade.

It is in this context that the Council for Mortgage Lenders, the industry trade body, this week launched a discussion paper which calls for mortgage protection insurance to be made compulsory. If this happens, CML said the cost of comprehensive cover could be cut from about pounds 5.50 to pounds 2 per pounds 100 of benefits, perhaps even less. This is because if everyone were in a scheme, its overall costs could be cut.

That may be so. But for borrowers, this would add an extra pounds 6 a month to the cost of a typical pounds 50,000 mortgage. Small beer perhaps, but coming on top of every other interest rate rise so far this year, it would affect most deeply those least able to afford it.

To be fair, CML has offered up this idea as part of a package which would include a pounds 250m boost to less well-off mortgage borrowers along the lines of benefits already given to low-paid tenants in work.

But there are no prizes for guessing what some of New Labour's great thinkers are already saying: "Thanks very much for the compulsory insurance idea. We'll tie it in with a removal of benefits to unemployed borrowers for 18 months or even two years. Oh, and forget about the pounds 250m aid to poor borrowers."

As seems to happen so often nowadays, Mr Major and his cohorts fashioned the bullets. Now it is Labour that is firing them.

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