I remember that, silly interest only mortgage situation - I almost had sympathy except they'd had chances to sort it before it came to a head.
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Discussion about mis-selling of endowment mortgages in the 80s and 90s
- Thread starter Rroff
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I remember that, silly interest only mortgage situation - I almost had sympathy except they'd had chances to sort it before it came to a head.
Man of Honour
Part of both of my daughters jobs deal with customers who have only paid the interest and they normally ring them up with five years to go to arrange larger payments or taking the house off them.
Soldato
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I wonder how many people get interest only and forget they've still got the rest to pay.
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That normally doesn't end well and results in the house been taken from them or handed back anyway.
Man of Honour
Nearly all of them.
At one point the bank offered to keep the house and they could pay the same rent as the mortgage they were paying to stay in it but they've stopped that now.
I'll be with the pair of them within the hour (my 65th today) so I'll ask what percentage sell up or try to pay it off.
Me and the wife had an interest only but we took an endowment out with it at the same time (a type of insurance).
We were told in 1983 that the endowment would pay £30,000, £14,000 for the house and £16,000 in our pockets.
We were very lucky compared to some, at the end of the 20 years we owed £1200 because the endowment didn't pay out what we were promised.
One of my very close friends has only paid the interest but has lived in hope that the day their Mum dies they get the money to pay off the mortgage.
If the Mum doesn't die in the next 3 years they are buggered.
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Still cheaper than renting and if you can make it work, perfectly serviceable from a financial perspective if you move to a lower cost of living area.
My in laws gossip about her auntie and their interest only situation. They really don't understand anything other than basic mortgages so it's totally unfounded criticism. Especially as they've just bought a 500k house cash with the equity.
Commissario
IIRC my parents mortgage was endowment for a while when they first got the house, but they also paid more which was fortunate when from memory in the 90's it turned out most of the endowments were not going to meet the full payment due to the high interest rates in the 80's, and lower than expected returns on the policies*.
One of my friend's parents kept remortgaging their house every few years as it increased in value (taking advantage of the time when you could relatively easily get 110% mortgages etc) and they kept using the money for things like foreign holidays, I think they ended up losing the house in their 60's when they retired and still had a big outstanding mortgage (IIRC they retired just as the crash happened in 08).
*One of the reasons I've tried very hard to never get into debt, even just "normal credit" is I know how hard my parents struggled to avoid it, and how fortunate it was that they did as they were in a better situation later in life than some of their friends who were much better off (but spent accordingly and used a lot of credit constantly)
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Commissario
We took out an endowment mortgage in 1991 and when it all kicked off a few years later, our case for being mis-sold was rejected because when we'd gone through the application we'd selected 7 out of 10 for how prepared we were to take a risk.
So when I added a chunk to the mortgage to buy a car, I discussed with the broker about adding an extra policy that was set to mature at the end of the initial period and would cover any shortcoming in the original deal. As far as I was concerned it was all set up and everything was peachy.
I was absolutely gobsmacked when I received a phone call in mid 2016 telling me that my original endowment was due to mature in October and asking me how I was going to pay the not insubstantial outstanding balance. It transpired that for some reason I've never been able to find out, that additional policy was never set up, even though I was convinced it was. The bank were very good and even though I didn't have an especially good credit rating at the time, they set up another mortgage at a very low interest rate fixed for far more years than they should have done. I basically put every spare penny I could into it and I completely paid it off a couple of years ago.
I appreciate this is nothing to do with the bonkers theories of freemen of the land but just pointing out that it was very possible to get caught up in these interest only endowment policies that were very common a few years ago. A lot of people suffered.
Man of Honour
Daughters have said out of 100 interest only customers who have to be reminded only about 1 will give up the house while the others come up with a deal.
Endowments aren't necessarily bad per se, they just come with added risk. Instead of paying off the mortgage directly, you're investing in the stock market essentially, that has some variance associated with it... on the other side of the coin are cases like my parents who had an endowment that not only ended up paying off the mortgage but resulted in a surplus, so they got a big lump sum payment on top.
Salespeople were pushing these things so there have been cases for misselling, part of that of course is that the legal system seems to set a very low bar in terms of competency and basic numeracy for the general public so pushy salesperson = possible compensation for some if the risk weren't spelled out really clearly.
These days people selling financial products have to take an explain it like I'm 5 approach and get people to declare multiple times that they understand the risks.
Salespeople were pushing these things so there have been cases for misselling, part of that of course is that the legal system seems to set a very low bar in terms of competency and basic numeracy for the general public so pushy salesperson = possible compensation for some if the risk weren't spelled out really clearly.
These days people selling financial products have to take an explain it like I'm 5 approach and get people to declare multiple times that they understand the risks.
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Commissario
Exactly like we were promised. We were told that when the endowment matured, it would pay off the full mortgage and we'd have a huge payout at the end as well.
Yup, there was a huge thing about it.
You weren't promised anything. You just ignored the downside entirely.
Commissario
How dare you presume something when you weren't there.
We were told that when the policy matured, it would cover the balance of the mortage and give us a large lump sum. No ifs or buts, that was the promise, absolutely no doubt whatsoever. Don't just ask me, ask the millions of people who were mis-sold these products.
Man of Honour
I agree with Feek, back in 1983 we were led to believe we'd get £30,000, we didn't hear anything negative.
Soldato
Happy birthday to us Sir!
Commissario
Or maybe you're just wrong
It's surprising how many institutions dabble on the stock market.
I remember a few years back a list of banks and local councils were using people's money to invest in large sums.
The story seemed to disappear quickly, even though it exposed how the systems people assume are rock solid are built on big investments.
I remember a few years back a list of banks and local councils were using people's money to invest in large sums.
The story seemed to disappear quickly, even though it exposed how the systems people assume are rock solid are built on big investments.
Lol alright pal. Y'all ostriches if over the course of 20 years you didn't ponder if your INSURANCE policy invested in STOCKS was doing as expected. It isn't like your ability to understand the craic was limited to the sales conversation.Or maybe you're just wrong
Man of Honour
It wasn't sold to us like that and this is why it was a big deal (and still is a big deal years on) and companies were fined for mis-selling it.
A Google Search page full of it if you care to do some reading -
https://www.google.co.uk/search?q=mis+selling+endowment+policies&sxsrf=APwXEdeNoFwj5kUwKTzIO8z1QK2jrEC_ng:1685370670483&source=hp&ei=Lrd0ZNSzGorcgQbk-IvoDA&iflsig=AOEireoAAAAAZHTFPvqMXVqZDqJR8FrCFGRVC7M2CMm-&ved=0ahUKEwjUgoGB35r_AhUKbsAKHWT8As0Q4dUDCAo&uact=5&oq=mis+selling+endowment+policies&gs_lcp=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&sclient=gws-wiz
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