protection

Written in the stars

Financial despair has driven thousands to seek sanctuary in hokum practices but if we were all doing our job properly that wouldn’t be the case

by

James Watson,

head of sales and marketing, Paymentshield

Brokers experiencing a sharp downturn

in business should consider a career change and become the Russell Grant of their neighbourhood. Flippant? Maybe so. But when you read that thousands of stressed Britons are turning to astrology, psychics and spiritual healers to help them through troubled times then perhaps it’s not so fanciful. According to website vivastreet.co.uk

there has been a rush of subscribers to online spiritual services – a rise of almost 500%. It attributes this staggering increase to ‘insecurity’ caused by the financial crisis. Sure it is easy to scoff at those people that seek redress to their problems by star gazing or inner enlightenment, but the fact that they have been driven to such extremes suggests a degree of desperation and helplessness that should make those of us that work in the creditor insurance sector hang our heads.

Financial despair

It seems obvious that having so many people seek sanctuary in hokum practices means that somewhere along

the line we have failed in our duty to get across our message that the kind of financial despair that drives someone to seek solace in the stars can be avoided simply and relatively cheaply through the purchase of relevant insurance. It is also clear that the fear of losing one’s home rates highest on the concern of many. It is frustrating to know that this fear can be simply allayed by the purchasing of mortgage payment protection insurance (MPPI).

At the same time it is perplexing why any home-owner would want to go through life, with all its up and downs, without the security of knowing that they have this protection in place and basking in the peace of mind it offers. In what other sphere would you be encouraged to make, what for most people is their biggest financial investment, without knowing how to mitigate against any future change in circumstances that might impact on the ability to meet the repayments?

Failure to educate

One explanation is that there has been a failure of leadership by the industry, government and the education system generally and that failure to educate and inform has left many of those with a mortgage in a precarious financial position. Brokers are the industry’s interface with the consumer and, as

such, have the opportunity to fill this information gap by presenting the pitfalls as well as the pleasures of home ownership to their clients.

Some intermediaries may have been taken off the ball during the golden years of plentiful mortgage products and seemingly inexhaustible supply of prospective home buyers when proc fees alone satisfied many brokers’ desire for decent remuneration. However, now that the economic environment is somewhat changed, intermediaries looking elsewhere to make up the deficit caused by the stagnation in the mortgage market are seeing the sales of MPPI to new and existing clients as a relatively easy way to bridge any income shortfall and treat customers fairly at the same time. This could be a major factor as the economy begins to move out of recession with the likely result of an interest rate hike that could see many with a variable mortgage struggle with payment.

disastrous consequences

The homeless charity Shelter warns that a rise in interest rates could have disastrous consequences. Its recent research suggests at some stage 6.1 million people have resorted to borrowing on a credit card to help pay their housing costs and that nearly one million people are currently paying

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