Endowment meltdown: Just one in 100 will pay off the mortgage

amcluesent

More than three million home-buyers have been warned that their endowment policies are unlikely to pay off their mortgages.

They include Standard Life, whose endowments were sold in huge numbers to homebuyers who borrowed from the Halifax in the Nineties. In all, 735,000 policies, 98 per cent of its total, are likely to fail, while 1 per cent are in a perilous position, leaving just 7,500 on target.

Should be some bargains for BTL LLs when distressed sellers have to auction their property as there's not enough in the pot to redeem the mortgage!

lostinrates

Myparents bought a cruddy endowment. Thankfully they also took out a rpayment mortgage. They've lost alot, but thankfully their house will not be part of that loss.

baileysbattlebus

We had an endowment mortgage for the first 11 years of homeownership. When we bought our first house the Halifax Building Society as it was at the time (1982), was pushing endowments in a big way. And you had MIRAS too, endowments were tax efficient as you got MIRAS on the interest you paid - with an endowment mortgage you only paid interest.

Move on 11 years and we bought this house - they were still pushing endowments in 1993 - when we bought this. But we opted for a repayment mortgage - a colleague I worked with had already been told his endowment wouldn't cover his capital sum. That rang alarm bells. I am really glad that he told me otherwise we would have had another one. We cashed in our existing endowments, we got back quite a lot more than we paid into them.

I do know a quite a few people with endowment mortgages though - my 2 sisters are 2 of them. They just started paying off the capital and that was years ago. Most other people I know with them have done the same. My sisters both still have them - although one is mortgage free now and the other has a very small mortgage amount left. I don't know what returns the endowments will give when they mature in a few years.

purch

I feel sorry for the sucker (oops............person) who bought my Endowment off me in 1997 :eek:

BlondeHeadOn

We've got an endowment mortgage, but have been overpaying the capital for years anyway, so have more than halved it already and will have repaid it well before the endowment matures. In fact I was going to surrender it a year or so again, but was advised not to on these boards because it's a unit linked one - so will hang onto it in the hope that HSBC are buying loads of cheap units at the mpoment, which will make it worth more in the long run. Or something!

Also the endowment premium includes critical illness cover for myself and OH, which is one of the better policies (taken out before they excluded virtually all critical illnesses). So sticking with it for now. But as I said, we have no intention of using it to pay off the mortgage.

I'd be very worried if we did want it to pay off our full-sized original mortgage though....

IveSeenTheLight

I used to have an endowment policy. I actually had it before I bought and also cashed it in before I bought.

I feel for anyone who believed they were paying adequately into an endowment policy and now find it does not cover the capital on the property.

It's a bit similar to pensions I think, where people pay for many years and are now finding that the pension will not provide the income that was initially expected.

This is why I and I'm sure many others have diversified to try and ensure that our future is provided for.

nearlynew

IveSeenTheLight wrote: »

It's a bit similar to pensions I think, where people pay for many years and are now finding that the pension will not provide the income that was initially expected.

This is why I and I'm sure many others have diversified to try and ensure that our future is provided for.

Does anyone remember pension mortgages from the early 90s?

They were being pushed as the next great financial instrument when endowments were starting to become discredited.

Another example of people being screwed over by banks.

joolsybools

We learned about endowments and compound interest etc when I did my GCSEs in the late 80's. I always thought they sounded too good to be true. Presuambly that becasue they were.

HousingBear

nearlynew wrote: »

Does anyone remember pension mortgages from the early 90s?

They were being pushed as the next great financial instrument when endowments were starting to become discredited.

Another example of people being screwed over by banks.

Yes, I had one of those. Mind you, I've paid off my mortgage now so I won't be needing the lump sum to do that.

Hmmm... how about a Morgan?

(croaky old voice) I'm only 45, you know...

fc123

nearlynew wrote: »

Does anyone remember pension mortgages from the early 90s?

They were being pushed as the next great financial instrument when endowments were starting to become discredited.

Another example of people being screwed over by banks.

We chose not to have an endowment in 1990, despite very pushy salesman saying how fab they were.
I would like to say this was because we were very smart 20-somethings who remembered the compound interest lesson during Maths GCSE lessons (are you sure? I only recall matrices and logarithms) but, alas, no.
A shrewd family member said 'repayment' don't sign for anything else.

That's what we did, though everyone else we knew bought endowment policies and thought we were being old fashioned.

Pension mortgages?
Lloyds tried to sell us one years ago as we are self employed. She was practically sweating with excitement when telling us about it.....and gutted when we decided to stay with our boring old repayment with a building society mortgage.
We had been invited in for a 'small business review'' but sat there being sold a health plan, a pension mortage and something else I can't recall. Meanwhile, I tried to tell her how synthetics were making a manistream comeback and we were well placed to make a few bob on that trend revival. She glazed over.

I wonder of she still works for Lloyds?

cleanmycleats

amcluesent wrote: »

More than three million home-buyers have been warned that their endowment policies are unlikely to pay off their mortgages.

They include Standard Life, whose endowments were sold in huge numbers to homebuyers who borrowed from the Halifax in the Nineties. In all, 735,000 policies, 98 per cent of its total, are likely to fail, while 1 per cent are in a perilous position, leaving just 7,500 on target.

Should be some bargains for BTL LLs when distressed sellers have to auction their property as there's not enough in the pot to redeem the mortgage![/QUOTE]

Hey, great news, maybe I'll invest a few quid...