Is it worth claiming?

Ex-Spendaholic

Long story cut short:

1993 - £33K mortgage (Halifax), L&G endowment (both through mortgage advice company)

At the time the advisor kept saying that the mortgage would be paid off at the end of the term and we would have a surplus of £70K (or something like that) to buy a villa in Spain, sports car etc etc)

To take an interest only mortgage and an endowment policy which was going to give a £70K surplus was actually costing £20 per month less than a repayment mortgage. She said we would be fools to go for a repayment mortgage as all we would get was our mortgage paid off but no lump sum. No mention that there could be a doomsday scenario. We were both 21 years of age and would have believed anything.

2001 (or thereabouts), the letter arrives. Your endowment is currently underperforming by £11,500K. :eek:

Rang L&G who urged us to up our premiums. Within the week we sold the policy to an endowment firm (£3500) and changed to repayment. This meant we had to borrow the same amount all over again. :mad:

I have some of the original documentation. It contains the illustrations about how the mortgage would be paid off and the great lump sum. I believe that in the minute print it may state that there is risk involved.

Do any of you experts believe it's worth claiming?

defender_of_the_weak

If you think you were missold then you should complain

EdInvestor

Rang L&G who urged us to up our premiums. Within the week we sold the policy to an endowment firm (£3500) and changed to repayment. This meant we had to borrow the same amount all over again.

Do you mean you had to double your mortgage payments? :huh:

If the original loan was 33k, the new loan should have been 33k, minus the endowment surrender value (3.5k) = 29.5k.

I'd have thought interest rates would have been quite low then? IIRC at around that time, many people were able to cover their whole shortfall by proceeding as above, with nothing extra to pay out, as the saved endowment premium covered the additional cost of the repayment loan .

brasso

It has to be worth claiming, especially if you have documentation that mentions the possiblility of that ludicrous £70K surplus figure.

No doubt it will be argued that this was for illustrative purposes only but it still seems like a silly figure on a £33K mortgage.

The good thing is that, let's face it, £33K, or £29.5K, is a relatively small mortgage compared to most of us. I appreciate that the principle is important but as a debt, it could be worse. If you can, overpay as much as you can or choose a short repayment term. With my current mortgage repayment, I would be clearing a £30K debt in 20 months!

dunstonh

It has to be worth claiming, especially if you have documentation that mentions the possiblility of that ludicrous £70K surplus figure.

No doubt it will be argued that this was for illustrative purposes only but it still seems like a silly figure on a £33K mortgage.

The regulator set the rates. So, thats not something that you can complain about and hold the firm responsible for. The top rate could easily show double for a 1993 illustration. The 80s/90s had very good growth and the figures used on illustrations then were actually lower than real figures even on poor quality funds. Nowadays, you need quality investments to get that sort of return. The sort of investments that are not available within an endowment.

Also, a 1993 endowment is destined to get shortfall warnings even if it wasnt in a shortfall position. The difference between the target growth rate and the illustrated rate being the issue there. A shortfall warning can often overstate the likely shortfall as well as understate in some of the worst cases. They are not reliable as a single source of information. However, they are useful when used with all the other information available.

At the end of the day, if you think you were mis-sold, then you can complain.