Lenders clash with Lilley over home loans aid

Mortgage lenders clashed with the Government yesterday when they met Peter Lilley, Social Security Secretary, to try to head off the coming cut in welfare support for home owners.

"What we drew from the meeting is that this is no longer a Government for home ownership," said Adrian Coles, secretary general of the Council of Mortgage Lenders.

The Government spends £1bn on income support for mortgage payers and is looking at ways to cut this bill, yet it spends £10bn on housing benefit, mostly for council tenants.

The Government announced in the November Budget that it plans to cut mortgage payments it will make for home owners claiming income support .

It currently pays half the mortgage interest for 16 weeks, then the full amount, but from 1 October new borrowers will get no payments at all for nine months. Existing borrowers will get no help for two months and half payments for a further four months.

Mr Coles said the two sides could not agree about the scope for private mortgage insurance. "We think it will be expensive with limited coverage. They think it will be universal and cheap."

There is no question of mortgage insurance being made compulsory, he said. The Government is not going to do it, although they considered whether the mortgage lenders might make it compulsory.

"That's not viable. It's a competitive market. Lenders not making it compulsory will get the best borrowers," he said.

Mark Boleat, secretary general of the Association of British Insurers, said he personally would never take out mortgage insurance and there were many others who did not see the need for it in their own circumstances.

About a third of new buyers take out mortgage protection, and the market could be for 50 to 80 per cent of borrowers. It usually starts payments after 60 days and they continue for one year. Most lenders have their own version of the cover and charge, onaverage, £7 per £100 of monthly payments, but rates can go as high at £10 per £100. For a loan of £50,000, this would add £36 to the £360 monthly payment.

The lenders did wring one small concession from their meeting with the minister. Mr Lilley assured them that the standard rate of interest that will be used to assess claims would be a genuine average of current rates and would not be artificially low tolimit the cost to the Government.

There are about 15 insurance companies in the mortgage payments market, which is worth £250m a year in premiums.

General Accident is piloting a new form of the cover where five factors are taken into consideration to set a rate - age, gender, location, occupation and employer's business. The first two factors weigh most heavily, as claims for sickness have more impact as people get older.

Nicola Yeoman, development manager of General Accident Direct, said the average claim was for five or six months. "Most people have gone back by nine months. It will not be possible to trade off immediate payment for limiting cover to nine months."

Leading article, page 17

Life and Style
Arts and Entertainment
Southern charm: Nicolas Cage and Tye Sheridan in ‘Joe’
filmReview: Actor delivers astonishing performance in low budget drama
Arts and Entertainment
While many films were released, few managed to match the success of James Bond blockbuster 'Skyfall'
Arts and Entertainment
Up my street: The residents of the elegant Moray Place in Edinburgh's Georgian New Town
tvBBC's The Secret History of Our Streets reveals a fascinating window into Britain's past
Albus Dumbledore, the headmaster of Hogwarts School of Witchcraft and Wizardry has been the teaching profession's favourite teacher
ebookA unique anthology of reporting and analysis of a crucial period of history
Luis Suarez looks towards the crowd during the 2-1 victory over England
Life and Style
Cheesecake frozen yoghurt by Constance and Mathilde Lorenzi
food + drinkThink outside the cool box for this summer’s frozen treats
John Barrowman kisses his male “bride” at a mock Gretna Green during the Commonwealth Games opening ceremony
peopleBarrowman's opening ceremony message to Commonwealth countries where he would be sent to prison for being gay
Sir Bradley Wiggins removes his silver medal after the podium ceremony for the men’s 4,000m team pursuit in Glasgow yesterday
Commonwealth games Disappointment for Sir Bradley in team pursuit final as England are forced to settle for silver
Alistair Brownlee (right) celebrates with his gold medal after winning the men’s triathlon alongside brother Jonny (left), who got silver
England's Jodie Stimpson won the women’s triathlon in the morning
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Junior Research Analyst - Recruitment Resourcer

£18000 - £20000 per annum + OTE £25K: SThree: SThree Group has been well estab...

Senior Analyst - Financial Modelling

competitive: Progressive Recruitment: This really is a fantastic chance to joi...

Associate CXL Consultant

£40000 - £60000 per annum + BONUS + BENEFITS: Harrington Starr: CXL, Triple Po...

Business Anaylst

£60000 - £75000 per annum + BONUS + BENEFITS: Harrington Starr: Business Anal...

Day In a Page

Backhanders, bribery and abuses of power have soared in China as economy surges

Bribery and abuses of power soar in China

The bribery is fuelled by the surge in China's economy but the rules of corruption are subtle and unspoken, finds Evan Osnos, as he learns the dark arts from a master
Commonwealth Games 2014: Highland terriers stole the show at the opening ceremony

Highland terriers steal the show at opening ceremony

Gillian Orr explores why a dog loved by film stars and presidents is finally having its day
German art world rocked as artists use renowned fat sculpture to distil schnapps

Brewing the fat from artwork angers widow of sculptor

Part of Joseph Beuys' 1982 sculpture 'Fettecke' used to distil schnapps
BBC's The Secret History of Our Streets reveals a fascinating window into Britain's past

BBC takes viewers back down memory lane

The Secret History of Our Streets, which returns with three films looking at Scottish streets, is the inverse of Benefits Street - delivering warmth instead of cynicism
Joe, film review: Nicolas Cage delivers an astonishing performance in low budget drama

Nicolas Cage shines in low-budget drama Joe

Cage plays an ex-con in David Gordon Green's independent drama, which has been adapted from a novel by Larry Brown
How to make your own gourmet ice lollies, granitas, slushy cocktails and frozen yoghurt

Make your own ice lollies and frozen yoghurt

Think outside the cool box for this summer's tempting frozen treats
Ford Fiesta is UK's most popular car of all-time, with sales topping 4.1 million since 1976

Fiesta is UK's most popular car of all-time

Sales have topped 4.1 million since 1976. To celebrate this milestone, four Independent writers recall their Fiestas with pride
10 best reed diffusers

Heaven scent: 10 best reed diffusers

Keep your rooms smelling summery and fresh with one of these subtle but distinctive home fragrances that’ll last you months
Commonwealth Games 2014: Female boxers set to compete for first time

Female boxers set to compete at Commonwealth Games for first time

There’s no favourites and with no headguards anything could happen
Five things we’ve learned so far about Manchester United under Louis van Gaal

Five things we’ve learned so far about United under Van Gaal

It’s impossible to avoid the impression that the Dutch manager is playing to the gallery a little
Screwing your way to the top? Good for Lana Del Rey for helping kill that myth

Screwing your way to the top?

Good for Lana Del Rey for helping kill that myth, says Grace Dent
Will the young Britons fighting in Syria be allowed to return home and resume their lives?

Will Britons fighting in Syria be able to resume their lives?

Tony Blair's Terrorism Act 2006 has made it an offence to take part in military action abroad with a "political, ideological, religious or racial motive"
Beyoncé poses as Rosie the Riveter, the wartime poster girl who became a feminist pin-up

Beyoncé poses as Rosie the Riveter

The wartime poster girl became the ultimate American symbol of female empowerment
The quest to find the perfect pair of earphones: Are custom, 3D printed earbuds the solution?

The quest to find the perfect pair of earphones

Earphones don't fit properly, offer mediocre audio quality and can even be painful. So the quest to design the perfect pair is music to Seth Stevenson's ears
US Army's shooting star: Lt-Col Steven Cole is the man Hollywood calls when it wants to borrow a tank or check a military uniform

Meet the US Army's shooting star

Lt-Col Steven Cole is the man Hollywood calls when it wants to borrow a tank or check a military uniform