is misselling about endowment value or in comparison to repayment mortgage?

george_aardvark

Hi everyone

My building society agrees that I was given the wrong advise in 1988. But because I paid of a 15K lump sum in 1993 (early on in the mortgage) their numbers show I would break even if I cashed in now and took an early surrender versus my having had a repayment mortgage. Infact they suggest I
cash in now and start a new repayment mortgage.

If I had not paid off of the money, the endowment would leave me short by 40K.

They argue its not about the endowment not performing its about that I am not worse off verus a repayment mortgage - is this right?

My logic says if I had been sold a rpayment mortgage properly, I would have put the 15K in an a savings bank - at the end of 25 years I would have had no debt and the 15K too. This way I'll not have the 20K and if it remains as an endowment I would be 40K in debt.

Before I take it the Financial Ombudsman, I would appreciate some advise on what to take back to the building society. Afterall, they are being let off because I acted responbsibly.

Thank you for any answers

George

pjala

Thats interesting, because according to that reasoning if I had taken an extra interest free mortgage out with them on the assumption that the endowment would pay out more than the agreed original mortgage (they were selling endowments on the basis that there would be an extra amount on top tax free) then compensation should also be paid for that extra amount as well.
They seem to be moving the goalposts to suit their own pocket, rather than looking at the cold financial facts.
p

dunstonh

Endowment performance is not something you can complain about. Plus, you are in the middle of the term and in that time there will be bad years and good years. We have just come off a stockmarket crash so the last few years have been bad (for many but not all). However, a stockmarket crash in the early years can be beneficial even though it looks like initial bad performance. So they are correct in what they are saying.

I'm still seeing 25 year endowments paying out surpluses and as most of these needed at least 6% per annum growth (most needed 7%). Also, many of them showed shortfalls in the years before. Due to the inaccurate methods of projecting on conventional with profits endowments, that is often the case.

The compensation is there to put you in the position you would have been if you had been on a repayment basis.

pjala

If that is the case, and I have no other information to say it is not, then the Ombudsman have misadvised me on my claim. My claim has been in their office for around 18 months now, and I have clear indications in writing that prove that I was missold an endowment. I rang them recently to ask how the claim was getting on. I asked them as it was taking so long, it was disadvantaging me wrt the endowment and I wanted to get it sorted out ASAP.
I said I could not sort it out (get out a repayment) until it was sorted - to which the person on the line said if I sell the endowment or take out a repayment it would not disadvantage me as it was looked at in the time the endowment was ongoing and any compensation would be over that period.
From what you say if I had sold it or acted on it, rather than just leaving it, they could claim I was in a better position.
P

andy88_2

Surely part of the reason that endowments (mostly broadly based, including cash and fixed interest) have performed less well is the fall in interest rates?

So people have been better off by lower interest repayments. They have also been advised in writing to consider putting some of the money saved into the investment product.

I find the idea that almost all endowments were, by their nature, oversold a bit simplistic. So I'm interested in seeing more on the subject, particularly whether the lender must mitigate the losses of people who did not change the interest payment vs investment balance when advised.

I certainly don't intend this as a comment on the OP's particular case,but a general question. Apologies if there's already too much discussion already that I have not seen yet.

I now see large press articles predicting that interest-only mortgages are becoming more popular. Full circle?

dunstonh

Quote:
Originally Posted by dunstonh
Endowment performance is not something you can complain about.

I wish you and others would not keep repeating this nonsense as a headline DD.

You may call it nonsense but the FSA clearly state the poor performance is not grounds for a complaint.

What is grounds for complaint is if the risks associated with the product were not made clear. That is something different to performance. The OP was quering that particular statement given to them in their complaint.

The rest of your post i more or less agree with.

Had the management of the life companies reacted to the changes in the economy, interest rates and Gordon Browns excessive taxation burden and told people that whilst they have benefited from cheaper mortgages, the endowment premiums need to be increased to compensate for lower anticipated future returns, then I doubt we would have any of the problems we see currently.

andy88_2

dunstonh wrote:

Had the management of the life companies reacted ... and told people that whilst they have benefited from cheaper mortgages, the endowment premiums need to be increased to compensate for lower anticipated future returns, then I doubt we would have any of the problems we see currently.

Or keep up the higher payment level and pay off sooner.

The first did happen but maybe too late and only on regulatory intervention.

pjala

The discussion is very interesting, but not helpful to the original poster- george aardvark. The mortgage company have "admitted" misselling - for good or ill.
Do the company then have the "right" to limit the compensation on the basis that george decided he would like to pay a lump sum off in order to have a lump sum from the endowment at the end of the mortgage.
The endowment was taken out to cover a debt - which happened to be a mortgage. If the company admit that he was "missold", they now are reneging on a part of that debt that they initially advised him would be covered by the endowment.

I am not an FSA or have any financial interest in any of this, but surely all that is required is that the company pump the figures into the calculator and come out with a compensation figure that is in line with the Ombudsmans guidelines. These guidelines dont allow for compensation on hassle, phone calls, time involved etc., but do allow for compensation to putting the "debt" back into the the same position as a capital repayment debt.

Surely if the company involved dont agree with this, then a call to the ombudsman is necessary, and as they have already agreed they are at fault - no contest.
P

george_aardvark

If I had simply taken the 60K endowment mortgage and paid nothing off I would be about 10K worse off than a repayment.

Had I then I put the 15K in the Bank I would see that amount in the bank plus interest - BUT I DID NOT.

The Builiding society calculates that the impact of the 15K is that the endowment and repayment actually balance each other out - something like 90K paid out in total on each with 20K in debt but with 8 years to run.

I have asked them for fine details since even at 2% lower interest for 12 years it cannot build up to having being a 10K difference.

So my own measures seem simply to help the building society avoid paying out the 10K differeence their result would have resulted in.

MY own measures they argue negated it.

Hope this helps

george_aardvark

Thansk - who is the marting you refer to please.