Need for payment protection ‘ever greater’

It said that with lenders clamping down on criteria following the credit crunch, consumers that were unable to gain access to prime mortgages or credit cards would have no option but to accept deals with ‘punishing’ rates or be unable to borrow at all.

It added that adverse borrowers must consider if they had enough protection, such as standalone payment protection insurance (PPI), to cover unforeseen situations.

Shane Craig, managing director of Paymentcare.co.uk, said: “It can take years for a history of mortgage arrears, bankruptcy and CCJs to drop off consumers’ credit history, but life goes on and these people still need mortgages and credit the same as anyone else.

“It’s very often the case that those least able to afford the repayments are charged the highest rates and have the fewest options, meaning that if they don’t put adequate protection in place, they could be making matters worse instead of getting back on their feet.”

Martin Wade, director of Mortgage Options, commented: “Having the right insurance in place is, without doubt, best advice. But where there is a lack of funds, the most important thing is to pay the mortgage. Some people are going to be faced with hard choices. The ability to remortgage away will be reduced and we’re already seeing that.”

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