Dáil Éireann Debate, Tuesday - 20 February 2018
595. Deputy Thomas P. Broughan asked the Minister for Housing, Planning and Local Government the parameters for mortgage protection for mortgages granted under the Rebuilding Ireland home loan scheme; the mortgage protection options open to these persons; and if he will make a statement on the matter. [8190/18]
Amharc ar fhreagra596. Deputy Thomas P. Broughan asked the Minister for Housing, Planning and Local Government if he will report on the Rebuilding Ireland home loan scheme and mortgage protection options for mortgages; if a person with a mortgage is open to source appropriate and competitive mortgage protection from providers; his views on whether their consumer rights are being restricted; and if he will make a statement on the matter. [8191/18]
Amharc ar fhreagraI propose to take Questions Nos. 595 and 596 together.
Mortgage protection insurance must be in place before a Rebuilding Ireland Home Loan is drawn down. The local authority mortgage protection insurance (MPI) scheme is overseen by the Mortgage Protection Committee, which is a sub-committee of the County and City Management Association (CCMA) and is representative of the CCMA, local authorities, the Housing Finance Agency and my Department. The local authority MPI scheme has applied to all house purchase loans approved by local authorities after 1 July 1986.
The Consumer Credit Act 1995 applied conditions on lenders which applied to local authorities as well as commercial lenders. Under section 126 of the Consumer Credit Act 1995 the lender is legally required to ensure that a prospective borrower has mortgage protection insurance in place before drawing down a mortgage. Where a lender offers a particular policy sub-section 2(d) of section 126 of the Act provides that the borrower can source an alternative policy to suit their needs. However, subsection 2(d) does not apply to local authorities.
One of the conditions of the scheme, which is a group policy, is that it is obligatory for all local authority borrowers who meet the eligibility criteria to join the scheme. Altering this condition would have a negative impact on the scheme and increase the cost for all existing borrowers. The group policy is a commercial insurance product which is procured in accordance with EU procurement rules. A local authority housing loan applicant who is not eligible for the local authority MPI scheme must source a suitable comparable individual MPI policy from the market.
It is not possible to compare standard mortgage protection insurance (MPI) products commercially available with the local authority MPI product. It is important to note that the local authority MPI scheme covers disability as well as death and that the disability cover is for the full period of the disability and not just 12 months as is the case in the majority of MPI policies available.
Standard MPI products are individually priced based on a member's age, amongst other factors, whereas the local authority MPI scheme is a group arrangement offering a single group rate per €1,000 sum assured to all participants in the scheme. As a result, it would not be valid to attribute the difference in cost between this scheme and standard MPI to any one issue as this is not comparing like with like. Aside from the difference between an individual and a group rate, the following factors have the main influence on determining the price of the local authority MPI scheme:
- standard mortality and morbidity factors based on population actuarial statistics;
- the local authority borrowers’ risk profile;
- the terms and conditions of the local authority MPI scheme and, in particular, the fact that all local authority housing loan borrowers are accepted without medical evidence;
- the claims experience of the local authority MPI scheme.
In determining the rate for the local authority MPI scheme, consideration was given to all of the above factors, and the procurement process undertaken reflected those requirements. It is important to also point out that there are a number of additional features of the local authority MPI scheme, including:
- in the event of a claim, the insurance covers the amount of the mortgage repayable on death which is similar to standard MPI;
- the member’s mortgage repayments are covered if there is a claim as a result of disability and not death; this additional feature is not included in standard MPI products;
- an extra cover of €3,000 is also provided in the event of a member’s death, which is not included in standard MPI products;
- the local authority MPI scheme covers members to age 75 for death, while ordinary MPI is usually based on a ceasing age of 65 unless an older age is agreed and priced.
The Mortgage Protection Committee which oversees the scheme endeavours to achieve a balance between the most economic rate to be charged for the scheme and the benefits provided.
