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Endowments – in the 80’s and 90’s
these were very popular as these supposedly offered
borrowers a lower cost method of paying back the mortgage.
Mortgage payments formed two parts, firstly the interest
was paid to the lender and instead of paying back some
of the capital an endowment policy was purchased (often
with very high levels of commission paid to the seller,
bank or building society). This gambled on the returns
from the endowment being high enough to repay the mortgage,
if you were lucky you’d get a large surplus as
well as your mortgage repaid. In times of good returns
from the stock markets etc this was all well and good….
But when the stock markets didn’t perform the
endowments policies did not payout enough and this is
where the problems started.
Often these policies were described as a sure thing
i.e. the only gamble was how much of a surplus you would
get. In reality thousands of these policies are now
way short of repaying the mortgage. If you have one
of these policies and were not told of the risks you
may have been mis-sold and could be entitled to compensation.
The Financial Services Authority (FSA) is a good source
of information for complaints.
The upshot of this is that endowments policies are
rarely offered now.
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