The guidance confirms that a waiver within a mortgage or finance agreement is not a contract of insurance but a contractual promise by the lender to waive a customer’s payment should a specified event occur.
Crucially, the guidance also confirms that lenders can build waiver features into their existing mortgages to provide customers with an in-built level of protection should they suffer from events such as unemployment or sickness.
Roger Humber, CEO at waiver specialists Protection Products Limited, said: “Following publication of the final guidance we are working with a number of mortgages lenders who are now keen to build waiver into new and existing mortgages to protect their customers from short-term financial shock and provide balance sheet protection for the lender.
“The final guidance couldn’t have come at a more important time with 36% fewer income protection policies sold and over one million more people unemployed than in 2005. It is time for lenders to take responsibility for building customer protection into every mortgage agreement.”