A new insurance product to protect homeowners from rising interest rates was launched this week.
MarketGuard believes its Interest Rate Insurance policy is the first of its kind.
The product covers people with a variable rate or tracker mortgage against interest rate rises, and starts paying out automatically once policyholders’ mortgage rate rises above a set level.
People can opt for the cover to kick in after interest rates rise by between one per cent and 2.5 per cent above current base rates. Premiums for the insurance for a typical £100,000 mortgage are around £17 a month for cover beginning after base rates rise by two per cent, although prices will vary according to interest rate expectations.
There is no cap on the pay-out, ensuring it covers the full increase in mortgage payments whatever rates rise to, and the money is automatically transferred to the holders’ bank account, without them needing to claim. The product is taken out on a two-year term, and it is fully portable if people switch home or lender. There are also no redemption penalties or exit fees.
The group estimates that there are around seven-and-a-half million people who are either currently on a variable rate mortgage, or are due to come to the end of a fixed rate deal this year.