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Have you been mis-sold an Endowment Mortgage?

Posted by , Trainee Solicitor

Hundreds of thousands of people across the UK have been financially affected by mis-selling scandals such as private endowment mortgages. In some cases customers affected could be awarded compensation and see the bank penalised with fines.

An Endowment Mortgage is an interest only mortgage which became popular in the 1990’s and was often connected to an investment product. People were attracted to this type of mortgage because they believed that the policy would ultimately pay off the mortgage upon the conclusion of the term and even result in a recoverable lump sum. Unfortunately, this appears to not be the case and millions of customers have been caught short with no return and an outstanding mortgage balance still to be paid.

Examples of mis-sold endowment mortgage

  • Many consumers were not made aware of the risks involved when entering into these agreements
  • Advice given was deliberately unclear and misleading
  • Often endowment mortgages were made to look more affordable with cheaper rates than a repayment mortgage

This resulted in customers having a false sense of security because they believed that they would receive investment returns which were in fact unrealistic and not proportionate.

It is now understood that many cases of endowment mortgage mis-selling occurred as a result of the incentives offered to advisors who were paid large commissions for selling endowment mortgages.

Potential compensation

The aim of any compensation awarded is to ascertain the overall loss caused by the negligence and to put the affected party back in the position they would have been had they never taken out the endowment policy. This would effectively put the customer back into the position they would have been had they not taken out the mis-sold endowment mortgage, i.e. as if they had opted for a classic repayment mortgage.

Normally compensation will also cover the cost of any fees payable to switch to a different mortgage plan or potential repayment charges. This will also take into account any difference in cost for life insurance cover, and protect you from premiums and interest already paid. The calculation will therefore be a comparison to what you would have paid under an ordinary repayment mortgage.

Finally, if there are any surrender fees payable on the endowment policy and/or the amount of capital left to pay off, this will be included when calculating compensation in comparison to the cost you would have paid for a repayment mortgage.

Do you have a claim?

When you initially took out your endowment mortgage you should have received clear advice on the best policy for you. Your advisor would have been obligated to provide you certain advice to ensure that you were aware and accepted the risk of the policy.

Claims against the bank or mortgage broker who potentially mis-sold you the endowment mortgage should be made within a certain time period.

The rules surrounding the calculation of compensation and time limits for bringing a claim are complex and if you think you may have a claim you should seek professional advice.

If you think you may have a claim then contact us today for free impartial advice.

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