Silver lining turns up in endowment mortgages

Mar 8 2005

By The Journal

Years of hostile publicity and regular "red" letters warning homeowners of possible shortfalls running into thousands when their mortgage expires, have turned with-profits mortgage endowments into the investment most people wish they had never made. More than 700,000 policies are surrendered short of maturity each year. Complaints to the Financial Services Ombudsman could top 65,000 in the year to April. But new figures from Prudential came as a surprise for those who say endowment policies are bad news. The insurance group told with-profit policyholders it was maintaining or increasing annual bonuses on policies after the fund achieved a 13.4pc return in the past year. It means a 25-year mortgage endowment costing £50 a month matures at £47,798 this year - 11.1pc up on its value a year ago. Given that it has been practically impossible to achieve an 11pc return on any other investment in the past year, some Prudential customers will be grateful they didn't press the ejector button on their policies. Story continues ADVERTISEMENT There was another curious statistic in the Pru figures. The company revealed it had teamed up with an anonymous lender to offer remortgages to customers who face shortfalls and want to switch to repayment home loans to avoid it. Yet a three-month pilot project found only 16 customers to make the switch. Many rivals - including Norwich Union, Axa, Standard Life, Commercial Union and General Accident - have already confirmed fresh cuts in payouts to beleaguered endowment holders this year. Amid the clamour for compensation, it is almost heresy to suggest the Pru figures, made possible by shrewd investment in bonds rather than shares, raise the possibility some endowments may be worth the ride. Brian Goldstein, chairman of the Association of Policy Market Makers (APMM) believes endowment policyholders missed out on £90m last year by surrendering policies to life offices instead of to firms on the traded endowment policy (Teps) market for resale. He said: "We have more buyers, particularly from Europe, than policies available, because they look at the sum assured and annual bonuses already accrued which can never be taken away and realise they can't lose, even if they have to pay premiums for many years up to maturity."

Top | Back | E-mail to a friend | Printable version

 

Copyright and Trade Mark Notice

© 2012 owned by or licensed to ncjMedia Limited. icNewcastle™ is a trade mark of ncjMedia Limited. Please read our Terms and Conditions and Privacy Statement before using this site.

 

Jobs Newcastle, Homes in Northeast, Used Cars Northeast, Newcastle Free Classified ads Mortgages, Jobs in Newcastle Local Mole - Local Directory