New insurance product launched

May 3, 2011 - PRLog -- The demands of the mortgage market have resulted in a new product that is a half-way house between a tracker mortgage and a fixed rate deal.

MarketGuard is offering a new insurance policy, which is helpful if you don’t have enough equity to remortgage to a fixed-rate deal from a tracker mortgage.

The policy protects monthly repayments from rising rates by capping repayments so you never pay more than a predetermined sum.

Policies typically last two years and even if rates go through the roof during those 24 months, repayments cannot rise beyond a certain point.

However, like all insurance policies you might be protecting yourself against something that never happens.

And the premiums are not particularly cheap so it is well worth working out all the figures before signing anything.

For example, a home-owner with a £100,000 variable-rate mortgage would pay over £50 a month for protecting themselves against a base rate rise of more than one per cent over two years.

That adds up to almost £1,300 for the duration of the policy. The policy would pay out only if rates went up by more than one per cent.

If, however, rates shot up by four or five per cent, the policy would pay out and the home-owner would be laughing.

Predicting rate rises is a tricky business and even the top brains in the business disagree about what will happen.

Melanie Bien at mortgage broker Private Finance said: "Borrowers should work out the price of such cover compared with the cost of remortgaging, bearing in mind their mortgage payments will still increase until rates have risen by at least one per cent, or two per cent if borrowers choose the higher limit.

“However, some borrowers would prefer some protection. A fixed rate makes a lot of sense for those on a tight budget who want peace of mind.”

Max Erskine from remortgagenow.co said: “This is an interesting deal, but I feel the number of people it would suit is quite small.

”However, if a home-owner is super confident that rates will shoot up then it will give peace of mind.

”And that is an important factor when one’s monthly repayments could shoot up beyond what one might have spare.

“A better option for most home-owners is to remortgage. There are plenty of products out there and with some good advice it’s amazing what a difference a remortgage can make.”
For remortgage advice http://www.remortgagenow.co

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