RISK: Endowment mortgage shortfall

[Caspar]

Around 80% of the 8.5 million endowment policies still in force are in danger of falling short of the sum required to pay off the policyholder's mortgage. Insurers are required to write to endowment policyholders every two years and inform them whether their investment is on track to meet the target sum. What should you do if you are told that your endowment may not measure up?

According to the latest Government report around eight in 10 of the endowment policies still in force are unlikely to pay off the mortgages they were taken out for - with the average shortfall being £5,500 - and it has warned the problem is likely to get worse.

I think my bro has one of these :( anyone else?

[Paul]

Nope, never touched them and never will.

[Aragorn]

Yep - I took out an endowment about 16 years ago and now it's predicting about a £10K shortfall :shocked:

I'm in the fortunate position of not having to rely on the endowment to pay off the mortgage, but it's still pathetic.

[soneill]

I have one. It was originally set up when I bought my first flat. When I moved house I changed mortgage type and kept the endowment running as a savings mechanism. I am lucky and don't actually care how much I get at the end of the day becuase my mortgage is covered.

The people who are relying on it to pay the mortgage have a much bigger problem. I suspect this is also aggravated by the people who get the letter warning of a problem and then 'panic' and can't cope / afford to do anything about it.

[Chris]

Yep, got one in 1999 when it seemed the mis-selling crisis was past its worst and the policy we were buying was built to take account of lower stock market returns. Then the markets crashed, then we had 9/11, and after a couple of years of amber alert letters, we got our first red alert letter last year.

I'm still not concerned ... I am now treating the endowment policy as long term savings and plan to change in a couple of years onto a full repayment mortgage. In two years' time I still won't even be 35 so I have years to pay off a 25 year mortgage without hitting retirement.

For the time being, having an interest-only mortgage is a rather convenient way of paying out less for my house while we have a young family and lots of bills. ;)

[Chimaera]

Same here - I got my endowment mortgage 7 years ago because that's all I could afford, but I plan to change to a repayment mortgage in a few years (once the kiddies have finished at Uni) then hopefully I'll have some money from it ;)

[swoop101]

I used to have one and after 9 years they told me it was going to be up to 19,000 short.
I complained and got all my money back and took out a new repayment mortgage.

[ian@huth]

I took one out 23 years ago but moving homes a few times has resulted in buying our present home for cash so no mortgage. We have kept the endowment going so two years to go to a very nice cash injection. :D :D

[Nidge]

Nope, never touched them and never will.


Me to, you were better off with the normal repayment, them endowments sounded to good to be true, they were. A lot of financial advisers got rich from these schemes and the owners lost out.

[Caspar]

Me to, you were better off with the normal repayment, them endowments sounded to good to be true, they were. A lot of financial advisers got rich from these schemes and the owners lost out.

Indeed you are correct, it's amazing how many people have lost out due to the ignornace of banks/building societies or independants (IFAs). :(

[andyl]

I've got one. Just got a compensation cheque from Norwich Union who dealt with my case remarkably speedily and fairly. Am now transferring to a repayment mortgage (NU pay for that transfer too) but keeping the endowment on as an, ahem, investment as it makes no financial sense to cash it. I'm lucky in that I can now clear a lot off my mortgage so will only have a repayment mortgage of around £9-£10k

[gary_580]

when interest rates were low on mortgages people should have been advised to pay off some capital as well as keep the endowment going. That way it wouldnt matter so much if the endowment didnt make as much as was projected. After all the FSA and Lautro before that are there to protect the consumer however it was these bodies that allow companies to use investment return %'s on projections that were never achievable.

[Tricky]

Two endowments both showing a shortfall, when we moved house this time I took a gamble and estimated that the endowments would bring in 50% of original estimate and got a repayment mortgage for the main bulk of my mortgage...

[Maggy]

All depends when you took one out.I had one in 1976.When it matured in 2002 it paid of the mortgage(ÂÂÂà ‚£9000) and there was about £6000 left over. :tu:

[zoombini]

I had one & yes that was about £5k short too.
Luckily I sold my house & made a profit so could pay it all off & cancel everything, got some nice cash back too.