ScotLife offers mortgage protection

SCOTLIFE Home Loans is offering a mortgage payment protection plan to all new borrowers, writes Caroline Merrell.

ScotCare will pay borrowers' mortgages for one year in the event of redundancy, accident or sickness. If borrowers opt to pay the plan monthly, it costs 6.6 per cent of the monthly amount to be covered.

For example, if a borrower's mortgage outgoings are pounds 400, the plan costs pounds 26.40 a month. Borrowers receive a discount if they choose to pay the premium in a one-off payment.

Mike Douglas, ScotLife Home Loans sales development analyst, said: 'The policy pays out for a year on any one claim. Our experience shows that the average claim is about six months.'

The policy begins to pay out after 30 days.

At the moment, people who are unable to work through redundancy or sickness and are on income support get half their mortgage interest payments paid for the first 16 weeks of unemployment. After that, they get it all paid.

The Government recently cut the maximum loan on which the benefit is payable from pounds 150,000 to pounds 125,000.

Mr Douglas said that there were signs that the benefit could be further reduced. 'There are indications that the Government plans to make the benefit means-tested,' he said.

Lloyds Bank is planning to offer all its existing borrowers the opportunity to take out this type of cover.

A spokeswoman said: 'We will be mailing all our customers in June with details of the policy.'

Usually borrowers are only given the opportunity of taking out the plan when they take out the mortgage. Lloyds' policy costs 6 per cent of the monthly benefit.