The biggest fear of most homeowners is that the main earner of the household could lose their job, writes Tony Booth.

And this, naturally, can cause mortgage repayments to become unaffordable.

MPPI was designed to allay those fears, providing a buffer should an unexpected financial crisis occur.

Currently only 24% of homeowners have an MPPI policy in place and those that have not face little help from the state, which only steps in to assist after nine months have elapsed.

People must have less than £8,000 in savings to qualify and, even if successful, income support only helps pay towards the interest - not the capital element of the loan.

Debt mountain

Homeowners shoulder the bulk of current national debt, which has encouraged debt agencies and charities to push for the introduction of mandatory MPPI.

Mortgage lenders are generally in favour of it, because it would guarantee the repayment of loans issued and - since the likeliest arrangement would be a bolt-on product to the mortgage itself - they would also gain from insurance commissions.

The losers would be homeowners and investors.

High-street lenders' MPPI policies are very expensive compared with identical products available from independent providers. If MPPI is factored into a mortgage product, it will raise the burden of repayment levels for homeowners and deny them the ability to buy cheaper alternatives.

The Government is likely to back the proposal for mandatory MPPI, because it will reduce the rising volume of repossessions and, fundamentally, reduce the overall Treasury bill for mortgage benefit currently paid through the welfare system.

There is no doubt that MPPI would be an asset for many and it would certainly help alleviate a lot of the suffering caused by debt in the UK.

However, if it is made compulsory, it is likely to affect all sectors of society, including experienced property investors, who usually have other financial strategies in place to prevent a problem with mortgage repayments ever becoming an issue.

Nonetheless, if things go according to the proposals, we will all have MPPI and higher mortgage repayment expenses by default - and regardless of need or desire.

These proposals also come at a very inopportune moment, because the MPPI division stands disgraced by being the first sector of the protection insurance market to be fined by the Financial Services Authority (FSA) for miss selling policies.

This is somewhat reminiscent of the days when endowment mortgage products were being heralded as a new and better way to help borrowers buy homes - and then the entire market fell into disrepute.

Bournemouth-based Regency Mortgage Corporation was stung with a £56,000 fine from the FSA for making misleading claims about its MPPI products.

Simon Burgess, the managing director of independent provider, Britishinsurance.com, is reported saying: "There have been warning signs that clients were getting a raw deal in this market for years. Despite the work done by the ABI and the CML, the baseline standard does not do enough to protect consumers and there are doubtless thousands more who have suffered at the hands of firms like Regency."

It seems that although in principle the idea of a mandatory MPPI is a good one, this may be just about the worst time to enforce it.

Simon Burgess suggests that while there are problems with the products, there are also endemic problems with the way MPPI is sold and marketed by both lenders and intermediaries.

The Council of Mortgage Lenders and the Association of British Insurers are already consulting on how the baseline standard might be revised and improved.