Endowments black hole hits £40bn

As many as eight out of 10 endowment mortgage holders are facing a shortfall on their policy due to a catalogue of failings by providers, MPs have said.

As well as facing an average shortfall of £5,500, 60% of policyholders could have been victims of mis-selling, the Treasury Select Committee report added. Overall, that adds up to a black hole of £40bn.

At least 8.5 million endowment policies - funds used to pay off home loans - are still in force.

MPs said many policyholders on lower incomes were now left in an "advice vacuum", not knowing which way to turn.

According to the House of Commons report some people may be forced into selling their home if they fail to act, with the elderly particularly at risk.

Yet most companies were still charging full fees, MPs said. The influential committee is calling for immediate action by the City regulator and the industry. In particular, it wants existing time limits on complaints to be extended, and better basic financial advice for people facing shortfalls.
The report estimated that between 50 and 60% of people could have been mis-sold a policy.

In many cases consumers purchasing an endowment mortgage were left with the impression that the policy was guaranteed to pay off the mortgage.

But the policies were far from guaranteed and were "probably unsuitable for many homebuyers", the report concludes.

Full story http://news.bbc.co.uk/1/hi/business/3498142.stm

Mar 11, 2005
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