Millions owed due to mis-sold endowments
June 6, 2008
There has been a great deal of controversy lately over the sale of endowments, which many officials are stating were mis-sold to consumers in the 1980s and 1990s, leaving many with little or no hope of being able to repay their mortgage at the end of the term. Endowments are sold alongside interest only mortgages to enable borrowers to repay the initial loan amount at the end of the mortgage term through the growth of the investment. The monthly repayments are used to pay off just the interest on the mortgage.
The purpose of the endowment is to run alongside the interest only mortgage and to provide a level of investment growth that will allow the borrower to raise enough cash to pay off the original mortgage loan amount, minus interest, at the end of the mortgage term. However, many consumers have been informed that their endowments are not performing as well as they should, and this is causing extreme concern amongst many officials as well as amongst borrowers on interest only mortgages.
According to some officials many consumers that took out interest only mortgages in the 1980s and 1990s were not informed of the risks involved with these endowments – the risk of them under performing and not raising the required money to pay off the mortgage loan at the end of the twenty five year period. Many consumers believed that the endowment would definitely raise enough capital to enable them to pay off the mortgage.
Reports now indicate that around £200 million is owed to victims of mis-sold endowments by way of compensation, and a number of companies that sold these policies have already started putting funds aside. Many lenders will not even offer interest only mortgages now because of the risks involved.
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