Endowment Mortgage Mess!

joolz1910

Hi, I'm new to posting on this site, please be gentle with me!

I took out an endowment mortgage for £47000 in 1999. My policy says that it is guaranteed to pay out £22,000 on maturity. I have received an 'amber alert' letter warning me of a potential shortfall of either £19000 if investments grow at 4% or £10000 if investments grow at 6%.

I am looking into pursuing a mis-selling claim, as the financial adviser who sold me the endowment laughed off the idea of this not paying off my mortgage in full! He said that he 'had to' point out that there was a risk but that it was negligible and that we could look forward to a lump sum in the future. We are not risk-takers (although admittedly quite naive) and feel that we were misled by his reassurances.

Has anyone had a similar experience or has an opinion on this, please?

dunstonh

I am looking into pursuing a mis-selling claim

You are joining the party a bit late there. Over 3/4 of endowments are now time barred from complaint.

the financial adviser who sold me the endowment laughed off the idea of this not paying off my mortgage in full! He said that he 'had to' point out that there was a risk but that it was negligible and that we could look forward to a lump sum in the future.

Whilst he laughed off the idea of it not hitting target, you were aware that there was a risk. That would work against you in a complaint.

We are not risk-takers (although admittedly quite naive) and feel that we were misled by his reassurances.

Possibly and you would need to make that point. However, knowing there is a risk and the risk not paying off is not normally grounds for complaint.

Has anyone had a similar experience or has an opinion on this, please?

have you checked to see if you are time barred?

I have received an 'amber alert' letter

So, its not doing too badly then considering the events of the last 18 months.

joolz1910

Thanks. I hadn't considered that it might be time-barred. We have been getting the amber alerts for 18 months or so, but I thought that it had to be red alert to really panic! Is it not as bad as it seems? A potential shortfall of £19000 has given me sleepless nights!

I must admit that I am only just getting my head around my mortgage(s). I'm ashamed to admit that it is only now that I have even thought about it - albeit when it's possibly too late.:(

dunstonh

We have been getting the amber alerts for 18 months or so, but I thought that it had to be red alert to really panic! Is it not as bad as it seems?

amber alerts only mean you are unlikely to have got to the time bar point as it takes a "high risk" of shortfall warning to start the clock ticking.

Also, if its only been amber of 18 months then that isnt bad. Even the endowments you expect to hit target in the long term will fall into amber during bad economic periods.

A potential shortfall of £19000 has given me sleepless nights!

Remember thats only a potential shortfall. It doesnt mean it will hit shortfall. That will largely depend on the quality of the funds used. Often whether its unit linked or with profits.

Your looks like it only needs 8% p.a. to hit target. That could well be achievable.

Also remember that endowment mortgages are typically a little cheaper than repayment mortgages. You could put an extra £20-£25pm into the mortgage as an overpayment. Use the extra cost saving to reduce the reliance on the endowment hitting target.

joolz1910

Thanks again. I have already transferred £10.000 over to repayment and I'm over-paying that by £150 per month. It has taken me 11 years to get proactive!:o Is 8% achievable? I think with the base rate at 0.5%, any % in full figures sounds huge

I think you can tell that my knowledge of financial matters is somewhat limited.:)

dunstonh

Is 8% achievable? I think with the base rate at 0.5%, any % in full figures sounds huge

Depends on where you are invested. I am averaging 14% p.a. on my investments. Endowment funds dont tend to be as good but if its unit linked then its quite possible. Most balanced managed funds tend to average around 7% a year long term and they are fairly basic.

What are the investment funds you are in?

joolz1910

dunstonh wrote: »

Depends on where you are invested. I am averaging 14% p.a. on my investments. Endowment funds dont tend to be as good but if its unit linked then its quite possible. Most balanced managed funds tend to average around 7% a year long term and they are fairly basic.

What are the investment funds you are in?

I have absolutely no idea (how embarrassing) - where would I find this information? To be honest, I don't know what the difference is between unit linked and with profits.

dunstonh

take a look at your last statement. It should mention units held if its unit linked and the fund name(s). If its with profits, it will mention bonuses.