Endowment Mortgages

 Seven Out of Ten Households Have Taken no Action

The Financial Services Authority (FSA) is urging people with endowment mortgages to act now if they are unhappy with the uncertainty over future returns. Results of a survey from the independent financial watchdog show that seven out of ten have so far not taken any action. To help people make a decision, the FSA is  launching a new factsheet “Your endowment mortgage – time to decide”.

In the past year, almost all households with an endowment mortgage have received letters telling them whether their endowment is on track to pay off their mortgage. Seven out of ten have so far done nothing as a result. Around half of those who have taken no action say they have good reasons, such as no longer needing the policy to repay their mortgage loan, but many others still have to decide what to do.

Christine Farnish, Director of Consumer Relations at the FSA, said:

"Making sure you can repay your mortgage loan is one of the most basic financial needs. If there's a risk that you won't be able to, and you're not comfortable with that, then now's the time to decide on what to do. If you need to put more money aside to pay off your mortgage, it's a lot less painful to do it sooner rather than later.

“We are publishing a new FSA factsheet which gives useful tips on all the options for people with endowment mortgages, including how to decide if you need to make a complaint.”

The factsheet "Your Endowment Mortgage - time to decide" is available from the FSA Consumer Helpline on 0845 606 1234 . The factsheet has a simple decision tree to help people decide what action to take. There is also helpful information on the advantages and disadvantages of all the options and important questions people need to ask before deciding what to do.

Survey findings

Nationally, around 10.5 million letters have been sent out by endowment providers to an estimated quarter of all households. Latest figures show that 45% of the letters warn that a shortfall is possible or likely. Future letters could show that policies are doing better or worse than current projections, depending on investment performance.

The FSA survey showed that 71% of people understood that the situation might change and that their policy could do better or worse depending on investment performance, but a quarter didn't know this. The survey also indicated a tendency for people to be optimistic about their own position: 29% expected their policy to do better than their letter suggested, 16% worse and 47% were unsure.

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