Rising unemployment means companies offering mortgage payment protection insurance have increased their prices sharply during the recession to account for a greater number of claims.

It means the average monthly premium for those looking to buy a new policy has jumped from £12 to almost £22 in just over a year, or an annual increase of £120.

It comes after the City regulator the Financial Services Authority announced that providers have agreed to pay back £60 million to existing MPPI holders who have suffered any increases in premiums since the beginning of the year.

It said 2.1 million customers have the polices, of which half have seen price rises since the beginning of the year.

Rising unemployment has made MPPI policies attractive to home owners who are concerned about losing their jobs and being unable to pay their mortgage.

Unemployment continues to rise amid the longest recession since 1930s. It jumped to 2.47 million, up 88,000 from the three months to May 2009 and up 677,000 from a year earlier.

Economists said unemployment will surpass the three million mark, matching the job crises seen in the 1980s and 1990s recessions.