Delayed red alert on endowment

Deguello

We've recently received a letter from our endowment provider, with the following information:

• We should have sent you a Mortgage Endownment Review, but didn't because of an error on our part.
• The letter would have explained that your endowment policy has moved to a red alert status. That means that there's a high risk of your policy not paying the target amount to help pay off your mortgage.
• Please contact us if you would have taken action if we'd sent you the Review.

You should have been sent a Mortgage Endowment Review annually from 2021 to date. This would have let you know that your endowment policy had moved from being at an amber alert status to a red alert status. An error on our part meant that the letter wasn't sent to you. We're sorry for our error.

If you believe you would have acted differently if you had received this Review, please call us so we can investigate your case.

We're on a part-and-part mortgage. We'd already been making overpayments on our mortgage (until the interest rate increases made these unsustainable), and hope to resume these if the interest rate ever goes down again. Once the endowment matures (December 2026), we'll look to move to a repayment mortgage, and should be able to get a much better deal than we're on currently.

Is there anything we should consider doing differently in light of the new information about our endowment? And is there anything we should be asking of our endowment provider, as it seems like it's taken them two years to let us know about the red alert status?

dunstonh

Is there anything we should consider doing differently in light of the new information about our endowment? 

No.   Projections are synthetic and not forecasts.   The regulator has changed the methods a number of times in recent years and the mid projection rate has now got so low that projections are regularly understating the likely returns on most investment products.

And is there anything we should be asking of our endowment provider, as it seems like it's taken them two years to let us know about the red alert status?

providers cannot offer advice or opinion.  They do not have the FCA authorisations to do so.   So, there is very little a provider can help you with.

We're on a part-and-part mortgage. We'd already been making overpayments on our mortgage (until the interest rate increases made these unsustainable), and hope to resume these if the interest rate ever goes down again. 

They will fall back a little in time but they are not going back to where they were (technically, I cannot say that but the post credit crunch rates were the lowest in over 300 years.  So, statistically unlikely in your lifetime).   Interest rates are actually still below the long term average.

 Once the endowment matures (December 2026), we'll look to move to a repayment mortgage, and should be able to get a much better deal than we're on currently.

Your ability to change deals is not influenced by the repayment style.   

Deguello

dunstonh said:

 Once the endowment matures (December 2026), we'll look to move to a repayment mortgage, and should be able to get a much better deal than we're on currently.

Your ability to change deals is not influenced by the repayment style.   

Ah, good point.

I think we were limited last time (house move, 2018) by not meeting the recently-tightened criteria for a new part-and-part mortgage deal: my single income wasn't high enough, my spouse is self-employed. However, if I remember correctly, our mortgage provider was obliged to offer us a like-for-like deal.

The payout from the endowment should significantly reduce the LTV of a new mortgage, which we'd hope would make a wider range of deals accessible.

silvercar

dunstonh said:

 Once the endowment matures (December 2026), we'll look to move to a repayment mortgage, and should be able to get a much better deal than we're on currently.

Your ability to change deals is not influenced by the repayment style.   

Of course it is, with the mortgage reduced by a repayment of the maturing endowment element, there will be a lower LTV and a lower salary multiple. Both could influence the number of deals and number of providers available.

In the extreme it could mean that a borrower has no option but to stick with the current lender now, but the maturing endowment means they could repay sufficient to change lender.