Exclude MPPI from Competition Commission referral

The Council of Mortgage Lenders has submitted its response to the Office of Fair Trading's (OFT) consultation on its proposal to refer the payment protection insurance market to the Competition Commission.

The CML argues that mortgage payment protection insurance (MPPI) should be excluded from the referral.

MPPI provides an important safety net for home-owners. With just over a million claims paid since 1998, MPPI has undoubtedly saved many households from repossession.

Many of the concerns raised in the OFT report do not apply to MPPI. It is more widely available on a stand-alone basis than other forms of PPI; the price range is narrower (varying by 40% from lowest to highest, compared with 150% for wider PPI products); and it has a significantly higher "claims ratio" , the proportion of premium income paid out as claims (33% compared to 19% in the wider PPI market).

The CML believes that any potential problems in the MPPI market are dramatically exceeded by the benefit to consumers. Any problems are already in the process of being addressed by the industry. If consumer - and seller - confidence is knocked by the referral, take-up is likely to reduce. Indeed, this is already happening. Only 22.8% of mortgages taken out in the first six months of this year were protected by MPPI, compared to 26.3% in the first half of 2005. The CML fails to see how it can possibly be in the consumer interest for more home-owners to be put at risk.

Michael Coogan, CML Director General, commented: "The OFT should exclude MPPI from the Competition Commission referral, because of the significant differences that set it apart from the wider PPI market. The damage to confidence and take-up of MPPI that would be created by a referral cannot possibly be in the consumer interest."