Endowment mortgage crisis continues

Around one in two of all endowment mortgage policies maturing this year are due to return less than the mortgage debt.

17:07 07 June 2004

Around one in two of all endowment mortgage policies maturing this year are due to return less than the mortgage debt, according to new figures.

Standard Life, one of the country's biggest endowment providers, admitted on Friday that 26,790, or 47 per cent, of the 57,000 policies maturing this year will fall short of their target, a substantial increase on last year, the Daily Telegraph newspaper reports.

Norwich Union, another of the major providers, said that 17,000, or 44 per cent, of the 38,200 policies due to mature this year would fall short.

Abbey also reported an increase, with only Prudential claiming that none of its 7,500 policies maturing this year would fall short.

Meanwhile, Standard Life said that an estimated 20 per cent of endowments maturing this year were "no longer linked, or had never been linked, to mortgages".

Most of the 10 million endowment mortgages were taken out in the mid-1980s and would not start maturing until 2008.

Years of falling bonus rates are predicted in the aftermath of the recent stock market bloodbath and previous bonus overpayments.

Ned Cazalet, an insurance analyst at Cazalet Consulting, warned that things can only get worse.

"This is merely the hors d'oeuvre," he said.

"One or two insurers, such as Royal London and Wesleyan, may perform better than others, but let's not kid ourselves.

"Practically all mortgage endowment policies will miss their targets when they mature after 2008."