Don't be tempted by mortgage insurance

You can now insure your mortgage repayments agains a rise in interest rates. But as with most insurance, you would probably be better off without it.

"Wouldn't it be great if you could insure your mortgage against a significant rise in interest rates?" asks Paul Farrow in The Daily Telegraph. Well, now you can, thanks to a new insurance product from MarketGuard. The policy is designed for anyone paying a standard variable or tracker rate, plus those who plan to do so once an existing fixed-rate deal terminates, provided the latter has less than three months remaining.

So, say I have a £150,000 variable rate repayment mortgage with 20 years left and have decided that I can afford an increase of 1.0% in both my mortgage interest rate and the Bank of England base rate (the "excess"), but would need insurance beyond that. A few clicks at Marketguard.com reveals that for £58 a month I can buy protection. Marketguard will cover my extra costs should rates rise beyond current levels, plus 1.0%. Had I chosen an excess of 1.5%, this drops to £37 per month and just £16 per month if I pick 2.5%. Sounds great if my variable rate falls I pay my mortgage provider less and if it rises, my exposure is capped via Marketguard.

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Tim graduated with a history degree from Cambridge University in 1989 and, after a year of travelling, joined the financial services firm Ernst and Young in 1990, qualifying as a chartered accountant in 1994.

He then moved into financial markets training, designing and running a variety of courses at graduate level and beyond for a range of organisations including the Securities and Investment Institute and UBS. He joined MoneyWeek in 2007.