Re: Mortagage protection for an affordable house
Yes they can force you to take it. The Competition Authority will not intervene as they did with private lenders because they see there being a policy justification for requiring affordable homeowners to purchase their mortgage insurance from the council. Personally I understand the logic of compelling you to have some mortgage protection; I don't really see why it has to be from them except maybe it reduces the hassle to the council (so they don't have to chase you down to make sure you're really getting it etc), but that seems to be enough as far as the Competition Authority is concerned.
In terms of the actual rate, the reason it's so high is because it includes things like disability which are often excluded from ordinary mortgage protection insurance. I asked around to a couple insurance providers what they would charge for what the council's insurance covers, and the council rate did turn out to be competitive. It's just that you wouldn't necessarily opt for all the coverage that comes with the council insurance.
It's probably the case that even if you were allowed to get your insurance from a private lender, the council would still require you to get all the extras so it wouldn't save you any money.