An Allercises Home Buyer’s Guide Reviewed
The All Powers Ltd. (APL) has recently come into the spotlight as one of the top selling mortgage payment protection policies in the UK. This article will go into more depth about the APL policy and how it works. For a quick background, the insurance industry in the UK has been in turmoil for the last several years. Lenders have lent billions of pounds to people that cannot pay off their mortgage and the result has been a massive increase in house prices that has resulted in many people being unable to keep up with the payments.
As the mortgage crisis has escalated, the Government has been forced to step in and pump money into the financial system. In order to stop the housing market from collapsing, the Bank of England and the Government have been offering a variety of schemes to help borrowers restructure their mortgages and get back on track financially. One of the most effective of these is known as the Alliances Bill. This is basically a revamp of the current mortgage product and covers some of the more basic aspects of the loan such as stamp duty and loan charges.
One aspect of the Alliances Bill is to introduce a new type of mortgage called an Allocations Bill. This would replace the existing Mortgage Market Regulations. Basically the Allocation Bill would form part of the new mortgage regulation reform package and would concentrate on covering the main aspects of mortgage loans. One of the most noticeable features is that this new policy will be aimed squarely at protecting borrowers. Although it will not cover all of the causes of home repossession, it will cover a vast majority of them.
The intention of the Allocation Bill is to cover three main aspects of property loans. First, the lender will be required to allocate a proportion of the value of the property to the repayment of mortgage costs. The property owner will be able to appeal to the Financial Services Authority if the proportion is below the lending cap set by the lender.
Second, the lender will also be required to cover costs relating to the early redemption of a loan. Up to the date value of the property may have been paid out but then could be redeemed after an agreed period of time by paying off the loan. This could be covered in one of two ways. In the first, the lender could agree to pay out to the property owner a lump sum which would be determined by a valuation exercise. In the second, they could choose to either add the cost of this into the mortgage or give the borrower a discount on their mortgage interest rate.
Third, the affordability of cover is a feature that has been thoroughly considered. This is because the Allocation Bill deals with the manner in which the repayments of mortgage costs are made between the various parts of the scheme. The FSA has carried out a series of reviews and this report considers the results of these tests. As a result, it concludes that to be suitable, a policy should cover the basic costs of refinancing in the short term and a high level of cover should also be available from the start of the mortgage in order to mitigate any risks associated with the mortgage.
However, as the review goes on the subject of affordability, it also highlights other aspects which could impact on the financial sustainability of the policy. These are the effect of inflation on prices and the impact of downward trend in rates of interest. When taking these factors into account, it is found that the policy will not adequately cover the cost of the mortgage balance in the long term. Also, in this instance, it would be more cost-effective to pay out a little more towards the mortgage balance as opposed to extending the length of the mortgage by taking on higher levels of cover.
As regards the questions surrounding the protection of the home owner in the event of mortgage arrears, the review finds that this protection is indeed there but that the level of cover is not high enough to protect the homeowner from a negative equity situation. Instead, a higher premium was required. This is due to the fact that the level of risk associated with the mortgage means that the lender faces a loss on any mortgage which is not fully paid off in time. In the Allpowers372Wh review, this lack of protection is noted as being unsatisfactory.