Endowment Shortfall

[strbear]

Fair Investment surveyed its users and found that 86 per cent of participants had received warning that their endowment policy would not be enough to pay off the mortgage.

Of those expecting a shortfall, 41 per cent said it could be as much as 25 per cent of their mortgage and a worrying 23 per cent of people said it would be a huge 50 per cent – meaning a bill of several thousand pounds. Just 6 per cent were expecting a surplus.

Full article at http://business.timesonline.co.uk/tol/busi...icle3962126.ece

Enjoy

SB

[right_freds_dead]

the only grace is that for many, they bought many moons ago, so the house prices they have a shortfall on were bought at a low point in housing.

a 30% shortfall on the average house (crica 1989) is only going to be 10k-30k.

a loan based on house value should be simple and no problem.

[Leonard Hatred]

I wish I could travel 20 years into the future and meet a couple who are mortgaged up to the eyeballs on IO and are facing a 100% shortfall because their huge wage rises never materialised.

[right_freds_dead]

I wish I could travel 20 years into the future and meet a couple who are mortgaged up to the eyeballs on IO and are facing a 100% shortfall because their huge wage rises never materialised.

you could induce a coma for 20 years and the results would be a little like time travel.

[expatowner]

Full article at http://business.timesonline.co.uk/tol/busi...icle3962126.ece

Enjoying someone elses financuial woes is a strange way to get your kicks.

I think 20 to 30 years ago, endowments and pensions and other financial demons encouraged many financial victims to get into the BTL game as a way of protecting what they had.

This is when those huge BTL empires started to grow.

Harry Enfield - loads-o-money.

[Guest KingCharles1st]

I wish I could travel 20 years into the future and meet a couple who are mortgaged up to the eyeballs on IO and are facing a 100% shortfall because their huge wage rises never materialised.

...and visit the public guillotine in Trafalgar Square, a stark reminder of the civil war between the have and have nots...

Well done that Chancellor.

[Bloo Loo]

These things were quite normal in 1980's and 90's.

It gauls me that people can claim.

You were offered a choice of plans, one was the full endowment, which cost quite a bit more than the alternative, the LO COST endowment. You chose the latter because it was cheaper.

And then you get upset when it didnt perform.

pathetic.

[stevebrowne]

These things were quite normal in 1980's and 90's.

It gauls me that people can claim.

You were offered a choice of plans, one was the full endowment, which cost quite a bit more than the alternative, the LO COST endowment. You chose the latter because it was cheaper.

And then you get upset when it didnt perform.

pathetic.

I agree. When we bought in 1994, we had to sign a disclaimer to say that we were refusing to take the IFA (?) advice to take an endowment, and went with repayment instead. I don't see why those people can claim when we can't, just because we thought through the various outcomes, and they blindly followed someone else (with a VI)

[markinspain]

These things were quite normal in 1980's and 90's.

It gauls me that people can claim.

You were offered a choice of plans, one was the full endowment, which cost quite a bit more than the alternative, the LO COST endowment. You chose the latter because it was cheaper.

And then you get upset when it didnt perform.

pathetic.

A bit harsh BL. In the days when it was only 3 times annual income to get a mortgage, a lot of people took any offer they got without really understanding what they were getting into. I was one of those who took one up in order to get on the ladder at the grand old age of 24, and of course at that age, I was financially illiterate. As far as I can remember, the bloke who sold me it was around the same age as me and didn´t really understand them either. He was just told to sell them.

So even in back in the late 80´s, the financial institutions were out to fleece the naive. All that´s changed is the volume.

[RichB]

A bit harsh BL. In the days when it was only 3 times annual income to get a mortgage, a lot of people took any offer they got without really understanding what they were getting into. I was one of those who took one up in order to get on the ladder at the grand old age of 24, and of course at that age, I was financially illiterate. As far as I can remember, the bloke who sold me it was around the same age as me and didn´t really understand them either. He was just told to sell them.

So even in back in the late 80´s, the financial institutions were out to fleece the naive. All that´s changed is the volume.

Not exactly, the locost endowments relied on interest rates remaining high - I think most of them would have worked if irs had stayed (iirc from the illustrations at the time) around 8% which at the time seemed reasonable. Who could have foreseen a labour government a) winnning an election and then being allowed to trash the economy for more than 1 term.

I had always thought a full cost endowment would be the way to go, as it rely on the repayments to cover the capital, it provided term assurance for you and would then pay out a nice cash sum if everything went according to plan.

But people always want something for nothing, and given the choice between something small for not much and something bigger for less they choose the latter, even though the risk profile is way beyond reasonable.

As someone said - pity the fools who have IO mortgages that wake up in 20 years wondering where the payments that should have paid the capital twice over have gone...

[Lepista]

Not exactly, the locost endowments relied on interest rates remaining high - I think most of them would have worked if irs had stayed (iirc from the illustrations at the time) around 8% which at the time seemed reasonable. Who could have foreseen a labour government a) winnning an election and then being allowed to trash the economy for more than 1 term.

I had always thought a full cost endowment would be the way to go, as it rely on the repayments to cover the capital, it provided term assurance for you and would then pay out a nice cash sum if everything went according to plan.

But people always want something for nothing, and given the choice between something small for not much and something bigger for less they choose the latter, even though the risk profile is way beyond reasonable.

As someone said - pity the fools who have IO mortgages that wake up in 20 years wondering where the payments that should have paid the capital twice over have gone...

No need to pity them - these are exactly the sub-prime that the banks are worried about - the ones that are going to "hand the keys back" and go bankrupt. In 20 years time, they will be sitting pretty, sat on the dole getting money for nothing and a nice social housing place paid for them* - it's the rest of us that will be paying for it.

*either that, or dead from living on the streets with a can of red stripe.

[roadtoruin]

These things were quite normal in 1980's and 90's.

It gauls me that people can claim.

You were offered a choice of plans, one was the full endowment, which cost quite a bit more than the alternative, the LO COST endowment. You chose the latter because it was cheaper.

And then you get upset when it didnt perform.

pathetic.

So you think the full endowments are set to perform adequately ? Think again. I had a full cost endowment that I recently sold on the open market after 17 years as it was no longer needed and performing badly. It was 'on-track' to underpay the required amount by about 25%. The performance through time was around 5% return. Most similar policies are underperforming, not just lo-cost, reasons being dips in stock market returns, over-optimistic estimates of 8% growth, and unreasonable commissions and maintenance charges. They were a con whether taken out 'full' or lo-cost. That's why people got upset - it's not that pathetic.

[RichB]

So you think the full endowments are set to perform adequately ? Think again. I had a full cost endowment that I recently sold on the open market after 17 years as it was no longer needed and performing badly. It was 'on-track' to underpay the required amount by about 25%. The performance through time was around 5% return. Most similar policies are underperforming, not just lo-cost, reasons being dips in stock market returns, over-optimistic estimates of 8% growth, and unreasonable commissions and maintenance charges. They were a con whether taken out 'full' or lo-cost. That's why people got upset - it's not that pathetic.

Its interesting that someone wanted to buy it though is it not? These were always set up to look pretty shonky until they were realised at maturity. It will be interesting to see what they finally look like when they mature.

[roadtoruin]

Its interesting that someone wanted to buy it though is it not? These were always set up to look pretty shonky until they were realised at maturity. It will be interesting to see what they finally look like when they mature.

That's a fair point, and I may have made a bad decision cashing in, but I'm guessing that most policies maturing over the next few years that are currently in 'the red zone' as the companies put it will not fare well unless the SM puts in a good show over the next 5 years.

In the end I decided not to gamble and just pay down some of my mortgage with sale proceeds. Bird in the hand and all that...