Mortgage payment protection schemes’ are under thereat following the news that homeowners made redundant and thus struggle to keep up with their mortgage payments, are to be given a two year grace period.

Chancellor Alistair Darling has filled in the gaps as to how this new system will work in the UK. Although hard to believe, prompting the notion too good to be true, those who are in obvious peril with regards to paying their mortgage interest payments will, if qualified, be given a helping hand.

Qualify

But to qualify homeowners must tick the relevant and in this case multiple boxes. One of which centres on savings, you can’t have any. Anything over £16,000 in savings will mean you fail to qualify for the scheme.

The fear from dissenting voices that support MPPI policies is that they may become invalid as consumers decide to rely on the government. This type of insurance has always been seen as a viable safeguard against the worst, but this news could spell the end.

MPPI

"Fear is prompting a big increase in demand. Our phones have been ringing non-stop with people wanting to buy payment protection insurance to cover their mortgages and other loans," says a spokesperson for independent PPI provider Paymentcare.co.uk.

Vera Cottrell, personal finance campaigner at consumer organisation Which?, insists that this news is too good to be true. "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."

"Protection products are complex, so you should get advice from an independent financial advisor who can look at the whole market for you and recommend the best policy to suit your needs," she says. "That way, you'll have comeback if anything goes wrong or you have a claim turned down," she added.

David Hollingworth at mortgage broker London & Country agrees that people should not dismiss MPPI because of the arguable security offered by the government's mortgage support package. "The government scheme should not be seen as a replacement for insurance," he says, adding: "If you cancel MPPI premiums now, you leave yourself dreadfully exposed."