MUTUAL lenders are set to offer a new type of mortgage that will have repayment waivers built in to protect borrowers if they lose their jobs or cannot work.
Under these “waiver mortgages”, when a borrower is not earning, the bank waives their repayments for a set time period. The lender does not lose out doing this because it takes out insurance against missed payments. The cost of this is borne by the lender.
With conventional mortgages, borrowers can take out a mortgage protection insurance policy to cover their repayments if they fall ill, lose their job or cannot work.
The Financial Services Authority is expected to give its approval to the mortgages in December and it is understood that two of Britain’s biggest building societies will offer them in the New Year. One of the mutually owned banks is also expected to sell the products.
Paul Walsh, European chief executive of CUNA Mutual, which insurers lenders in the US that offer a similar type of mortgage, said: “These mortgages allow lenders to act responsibly by ensuring that borrowers have more confidence in borrowing from them in the knowledge that if they can’t repay due to loss of employment, then the loan repayment can be “waived” in full.”