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Personal finance reporter Andrew Verity
"Mortgage practices are unfair"
 real 28k

Stephen Byers, Trade & Industry Secretary
"We have to make sure people have a genuine choice"
 real 28k

Sophie Gumpel, Consumers Association
" We are delighted the government has decided to take action"
 real 28k

Friday, 17 December, 1999, 07:11 GMT
Crackdown on mortgage tie-ins

Hidden commissions are estimated to cost homeowners 400 a year

The government is to stop mortgage lenders from selling home insurance alongside home loans.

The Property Maze
The move by the Department of Trade and Industry is another step in the government's drive to create a level playing field in the mortgage market.

It means an end to a system of tie-ins which is estimated to cost homeowners 400 a year in hidden home insurance commissions.

stephen byers Stephen Byers: "Borrowers getting a raw deal"
Trade and Industry Secretary Stephen Byers said some mortgages offering a low start-up interest rate come with compulsory buildings and contents insurance.

And he stressed the insurance does not have to be competitively priced because the borrower is unable shop around for a better deal.

Mr Byers added: "We will no longer be in the position where borrowers are paying less for their mortgage, but more than they need to for their insurance."

'Brilliant news'

The government's decision was welcomed by some insurance providers.

Ian Chippendale, group chief executive of Direct Line, the UK's leading direct insurer, said: "This is brilliant news for consumers.

"It is high time that banks and building societies were brought to book over their scandalous practices of making mortgage offers conditional upon the purchase of the lender's home insurance.

"Consumers will, at long last, be free from being forced to pay needlessly expensive premiums which we estimate can cost around 50 or more each year than insurance arranged direct."

Mr Chippendale urged the government to tackle other practices in the home loan market, including failure to calculate mortgage interest daily rather than yearly, excessive redemption penalties and lack of transparency to enable proper comparison of competing products.

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See also:
15 Dec 99 |  Business
Lenders face fresh grilling
09 Dec 99 |  Business
Mortgage complaints soar
29 Sep 99 |  Your Money
Q&A: Crackdown on home lenders
29 Oct 99 |  UK
Mortgage lenders given warning
14 Oct 99 |  Your Money
New standards for mortgage lenders
11 Oct 99 |  Your Money
Homebuying process gets shake-up
20 Oct 99 |  Your Money
A guide through the mortgage maze

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