(PRLEAP.COM) Forcing home-buyers to take out mortgage payment protection insurance (MPPI) would leave many people paying for policies from which they did not stand to benefit, warns Centrepoint Insurance Services.

The company says compulsory MPPI runs counter to the spirit of the Financial Services Authority’s principles of treating customers fairly, which the mortgage industry is obliged to follow.

Its comments come amid mounting speculation that the government is planning to force mortgage holders to take out insurance cover, following a rise in repossessions and an increase in the number of people missing mortgage payments.

Lee Titcumb, managing director of Centrepoint Insurance Services, says: “While we believe increased take-up of MPPI is essential if we are to avoid a wave of repossessions in the future, making it compulsory would place an unfair burden on many home-buyers.

“Some employees, particularly those in the public sector, may not need sickness cover as they receive 12 months’ full pay under the terms of their contract. Others have significant savings so MPPI may be inappropriate.

“Even if lenders agree to provide cover for free, the costs would inevitably be passed on to consumers in some form. We feel a better option would be for the FSA to use its existing powers to ensure that mortgage advisers fully ascertain the financial risks that clients face and give the same weight to making an MPPI sale and selecting the right product as they do to mortgage sales.”

Mr Titcumb says there are fears that making insurance compulsory could prompt lenders to build MPPI into a mortgage, which would effectively reduce consumer choice by dictating which policy they took out.

He adds: “While we are anxious to encourage more people to take out insurance, we feel it is essential that they are able to choose the product and the provider to ensure they end up with the policy that best suits their needs.”