The FSA's (now known as the FCA) first official estimate of the scale of the endowment crisis is more than double estimates from the Association of British Insurers and suggests that homeowners are facing a shortfall of around £30 billion. (1) Endowment mortgages were arranged on an interest only agreement. At the end of the mortgage there should be a promised lump sum, but when the endowment reached maturity that wasn’t always the case.
What is an endowment mortgage?
An endowment mortgage was essentially an investment policy set up alongside an interest only mortgage, with the view that the investment would flourish and accumulate enough money at the end of the term to cover the cost of the mortgage.
Clients who took out endowments were promised that it would not only pay off the mortgage or loan but that once the investment had reached maturity, the mortgage would be paid off and they would be receiving a promised lump sum. With such promises, it’s not surprising that endowments rapidly became a very popular policy.
What is endowment mortgage mis-selling?
Unfortunately, many endowment mortgage policies didn’t live up to their promises and left the policyholders with a mortgage not entirely paid off and no lump sum therefore leaving borrowers in uncomfortable financial situations far from what they expected.
Endowment mis-selling has affected thousands of people as financial advisors were found to be pushing these policies without fully accounting for their client’s financial circumstances or suitability at the time.
There were risks and even potential fees that were not made clear or in some cases not even mentioned. Often commission driven advisors would make unrealistic promises of a comfortable financial future whilst not always being fully transparent with policyholders and often gambling with their pensions and mortgages. Here are some possible reasons as to how your endowment may have been mis-sold:
- You may not have been informed that at the end of your mortgage term you possibly could have a shortfall
- The mortgage wasn’t fully explained to you
- The transparency of any fee or charges to do with the endowment weren’t upfront or explained properly
- You were told that the endowment would 100% definitely pay off the mortgage
- Your adviser highly recommended that you cash in an existing endowment and then sold you another
- The advisor selling you the endowment did not complete an assessment of your financial circumstances and therefore didn’t take into consideration the situation and the risks
- The endowment policy and mortgage was set up to run into your retirement and still continues to do so
- Checks on your income weren’t made, so your advisor did not take on board your financial circumstances
Starting an endowment claim
We have been helping people identify if they’ve been affected and those who have been mis-sold an Endowment Mortgage have been claiming what’s rightfully theirs for over a decade. You may think it is now too late to start a claim for a mis-sold Endowment Mortgage but that’s most likely not the case. If your policy has reached maturity, or if the firm who sold it to you is no longer in business, we may still be able to help you make a claim through the FSCS.
In most cases you’ll receive a warning letter stating a possible shortfall on your Endowment Mortgage. With most cases you can make a claim for up to 3 years after that first letter, and up to 6 months after receiving the second amber warning letter. The amber letter will indicate that there is a risk that the investment will not pay off the mortgage loan.
If you are unsure about your position or have any questions, please get in touch with our team, who will be on hand to help you understand your situation and help you down the best route for you.
EMCAS operates on a no win no fee basis with no hidden costs or upfront fees, so don’t hesitate to contact us to start reclaiming what you are owed. For more information on mis-sold financial products you can also download our brochure.