Interest-only resi mortgage - endowment issue found?

luckyduck5

Hi all,

My parents have an interest-only residential mortgage with one of the big banks, and are in their 70s now.

There are long-term issues eventually settling the balance without having to sell, but of course the bank will claim 'we warned you of the risks all along'.

We've now had the SAR in: we have noticed on the file that a couple of times when issues were flagged with the repayment vehicles (i.e. what was to be used to clear the balance at end of term), some sort of 'endowment policy' note was also triggered. But puzzlingly my parents never took out an endowment policy. The notes include wording such as: Endowment company, policy type, "bas sum assu", EAS premium, policy bonus, policy "sur val", "tot sum assu", and policy maturity date. 

The corresponding values in each case are listed as zero.

Could this indicate that there SHOULD have been an endowment policy in place to mitigate the risks? Or even than there is one lurking in the background, that the bank can make use of and is keeping quiet about?

Thanks!

davidmcn

Are they sure they never took out a policy? What's their recollection of discussions back at the start?

TrickyDicky101

When was the original mortgage taken out?  Have they ever moved banks (ie with a remortgage deal to get lower interest payments)?

dunstonh

There are long-term issues eventually settling the balance without having to sell, but of course the bank will claim 'we warned you of the risks all along'.

They don't need to "claim" that because it is a fact.  

But puzzlingly my parents never took out an endowment policy. 

Endowments were not the only option.  Pensions, PEP/ISA, alternative vehicles or intention to downside etc and at the height of the credit boom, people didn't have to take one out at all.

Could this indicate that there SHOULD have been an endowment policy in place to mitigate the risks?

No.   It just means the bank didn't sell one themselves or see sight of one.   Until around 1995, the banks would be assigned on the policy.  After around that time, they didn't bother any more.

Or even than there is one lurking in the background, that the bank can make use of and is keeping quiet about?

banks do not provide endowment policies.  Insurance companies do.   So, there is no logic in what you are suggesting there.

Endowments also had their own monthly direct debit direct to the insurer.  So, it cannot be hidden.

Thrugelmir

In the olden days lenders held an assignment over the endowment policies themselves. Your parents are in the era of self responsibility. What they did, intended to do is entirely on their shoulders. They will have be written to you over recent years asking them how they intend to repay the debt. 

Old_Lifer

All you have found  is a document stating:      Basic Sum Assured          NIL

                                                                         Premium                            NIL

                                                                         Bonus                                 NIL

                                                                         Surrender Value                  NIL

                                                                         Total Sum Assured             NIL

It simply confirms that no endowment was issued to repay the mortgage at the end of the mortgage term.

luckyduck5

Thanks all for the replies. Looks like it is nothing then.

I found another page that is more confusing regarding "interest only cover", with separate columns for PEPs = £0, Endowments =  £0, Pensions = around 10% of the loan (and matching a further advance given), and Other = the remaining 90% of the loan. 

Any ideas on what this is?

Thanks in advance

dunstonh

It seems to suggest that your parents told the bank that their plan was to pay around 10% of the mortgage from their pension and 90% for something else not on the list.