James Daley

By James Daley

The Financial Ombudsman Service published new data today, revealing that the number of people complaining about problems with their mortgage has been on the rise. Interestingly, almost a third of these complaints were from people already in arrears - with an increasing number being more of a cry for help rather than a genuine gripe with the product or service levels.

It's no wonder that more and more people are getting into trouble with their mortgage. Property prices in the UK are out of control, and it's practically a right of passage for the British middle classes to borrow more than they can afford to buy their dream home. Don't get me wrong, I'm not on a moral high horse here, I'm as guilty as the next man. But I'm puzzled by the fact that so few people take out any kind of insurance to protect themselves in the event that things go wrong.

The Ombudsman observed that some three in 10 mortgage cases were pushed by the customer all the way to final decision - illustrating just how high the stakes were.

It's not hard to see why people overstretch themselves. Property is simply too expensive, and while everyone around you is borrowing too much, it rationalises the risk you're taking. But given the increasing likelihood of losing your job in today's cut throat corporate world - or indeed the chances of being unable to work due to long-term sickness - it's surprising that so few people bother to invest in some insurance to protect themselves from the worst. Mortgage lenders insist on you taking out buildings insurance - to protect their stake in your property. Yet individuals tend to take out no protection to ensure that they can afford to hang onto their castle if they end up out of work.

Skydiving with no parachute

I suppose that at this point that I should disclose that I'm not even practicing what I preach here. I have no protection other than life insurance, as I make the assumption that I'd be able to find another job if I needed to. Income protection is a nice to have but I just can't afford it right now.

And as for getting sick, I tell myself that I'm young, and that I'll buy critical illness insurance when I've got a bit more cash (by which time it'll be more expensive of course).

I'm not sure whether the rest of the nation is in this same state of denial, or whether perhaps a lack of trust in the insurance industry is also paying a part here. PPI shot the protection market's reputation to bits. Although Mortgage PPI is not nearly as bad, and can be a decent product, most people wouldn't touch it with a bargepole.

What the protection industry really needs is a proper crisis. I'm surprised - and of course delighted - that more people didn't end up getting their homes repossessed over the past few years. Unemployment stayed low in Britain compared to the US, and the government's support for mortgage interest scheme - and other such initiatives - helped to keep a lot of people in their property.

If things had been different - house prices had plummeted and unemployment had sky rocketed, things may have been different. And the protection industry would have had it's moment to demonstrate why it's products are really important.

Obviously I hope we avoid armageddon. But if, as some believe, the current property price boom can only end in spectacular bust, the government would do well to start doing its bit to raise the profile of the protection industry. The more people who have protection, the lesser the welfare bill, and the lesser the chances of repossessions on a mass scale. So far, however, no political party has shown any appetite to get their teeth stuck into this opportunity.