payment protection

More properties were repossessed in 2006 than in any year since 2000. Why? A press release from British Insurance tells us: it is all down to “higher interest rates and first time buyers taking greater financial risks often borrowing in excess of five times their salary and opting for 25 year plus prepayment policies.” So what does the insurance company think we should do about these “disturbing” numbers? Buy fewer houses perhaps, or at least not take out such huge mortgages that we are almost guaranteed to get into trouble. Of course not. It wants us to carry on borrowing just as much money and taking just as much risk but to buy more expensive insurance from it at the sam e time. Never, says the firm’s spokesman Simon Burgess “has the need for Mortgage Payment Protection Insurance been so apparent.” Take it out and you’ll have a vital “safety net” if things go wrong.Why banks love payment protection insurance?Well, maybe, maybe not. Payment protection insurance (PPI) is a favourite of high street bank financial advisers and insurance salesmen across the country. Why? Simple. It is overpriced and hard to claim on, so they make an absolute fortune from selling it to you. Paymentcare estimated last year that of the £4 billion spent by borrowers on PPI every year a massive £2.5 billion is stripped out immediately in commission payments – they know they aren’t going to need it to pay claims.The idea of PPI and MPPI - one of which you will be offered it every time you take out a mortgage, a credit card or a loan of any kind – is that if your circumstances change such that you are unable to repay your debt, the insurance will do it for you. The sales pitch will be that buying it is the sensible thing to do, that if you are made redundant, get very ill or have a serious accident you will need it.