Failing home owners? The effectiveness of public and private safety nets.

In the context of growing risks and expectations of greater personal responsibility, this paper presents the results of a study of the effectiveness and implications of the new pattern of safety-net provision for mortgagors in Britain which was implemented in October 1995 and which involves both private insurance (MPPI) and public provision (ISMI). The paper focuses primarily on those borrowers most likely to experience the risks associated with home ownership and least financially able to respond to them. For these low-income borrowers, access to, and the effectiveness of, social protection is critical. The data presented are drawn from two surveys of mortgagors, one of private insurance claimants and the other of those claiming on the state safety-net. The discussion indicates that the nature of the 'new' safety-net provision in Britain is problematic. Low-income borrowers are currently least likely to take or have access to MPPI. Where they do have MPPI, they are relatively less successful than better off borrowers in sustaining a claim. For those without MPPI, the deferral period before receiving state assistance (ISMI), and the restrictions to the assistance when it is paid, result in a large minority developing mortgage arrears. The state safety-net is shown to be less effective now than it was in the mid-1990s.