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Family BS launches UK’s first mortgage with built-in redundancy waiver

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Written by: Vicky Hartley
15/07/2014
Family Building Society, which launched yesterday, began offering the UK's first ever mortgage waiver product, offering built-in unemployment protection for borrowers.

Parent mutual National Counties BS has added the waiver to its Family Mortgage, adding a layer of six months’ redundancy protection for the borrower in the case of job loss through no fault of their own.

The waiver is provided by CUNA Mutual through a Combined Liability Insurance Policy (CLIP), which allows the liability to be taken off the lender’s books once the firm has verified the circumstances of the redundancy.

The waiver covers the mutual’s Family Mortgage, which allows relatives to boost their adult children ‘s chances of buying a first home.

A family may deposit savings in an interest paying account as security for the buyer’s mortgage, or take a second-charge as security or deposit savings in a non-interest-paying family offset account.

The mortgages are offered at 3.99% for the three-year fix, or 4.39% for the five-year.

Roger Humber, CEO at Waiver Experts Protection Products said:

“Mortgage waiver is a relatively simple concept. It’s a promise from a lender to cancel mortgage payments if an event occurs, such as unemployment. The borrower has not missed a payment, they are not in arrears and they have breathing space to regain employment without damaging their credit rating in the process.”

In the UK, firms already using a waiver as standard with credit agreements include Peugeot and Citroen for car financing enabling customers to walk away after six months if they can’t afford the payments.

Hitachi Capital and a number of credit unions are also already covering loans this way and Humber said he expects another car financing firm to launch with waivers in Q3 followed by a credit card provider in Q4.

Waiver products are already used in New Zealand, Australia, Canada and the US and could provide a workable solution to the protection gap and demise of the Mortgage Payment Protection Insurance market.

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