Discussion about mis-selling of endowment mortgages in the 80s and 90s

[dlockers]

Gen X quietly stays out of this generational war as on one side are our parents and on the other side our kids!

 

[Slam62]

Literally the only man who cleared his mortgage, took £18k profit to buy a brand new car, but STILL disappointed because he thought returns was a kinky time.

Well the 2000s were even worse from that point of view, remortgaging was the thing to do.
At one point I had a Barclays mortgage (Woolwich) which was offset, we kept remortgaging to get a better rate and sometimes cashback, they paid all the fees. At one point they just gave you access to a pot of money which was the difference between the mortgage valuation and the mortgage, in our case we probably could have had 100 grand , if you dipped into it you were charged your mortgage rate. We never touched it but a lot of people did.

 

[dlockers]

Well the 2000s were even worse from that point of view, remortgaging was the thing to do.
At one point I had a Barclays mortgage (Woolwich) which was offset, we kept remortgaging to get a better rate and sometimes cashback, they paid all the fees. At one point they just gave you access to a pot of money which was the difference between the mortgage valuation and the mortgage, in our case we probably could have had 100 grand , if you dipped into it you were charged your mortgage rate. We never touched it but a lot of people did.

That is A LOT of words to demonstrate lack of understanding of what equity release is.

 

[Mercenary Keyboard Warrior]

Well the 2000s were even worse from that point of view, remortgaging was the thing to do.
At one point I had a Barclays mortgage (Woolwich) which was offset, we kept remortgaging to get a better rate and sometimes cashback, they paid all the fees. At one point they just gave you access to a pot of money which was the difference between the mortgage valuation and the mortgage, in our case we probably could have had 100 grand , if you dipped into it you were charged your mortgage rate. We never touched it but a lot of people did.

Offset mortgages, again another really good idea for the financially savvy but a nightmare for those who cant spend money fast enough

 

[Slam62]

That's what I was trying to understand, so people thought they were effectively being sold a savings account but with a different name and astronomical returns, with no reason to question how or why such massive returns might be possible.

I'm still not sure how it passes the common sense test personally, you rarely get something for nothing and even without modern financial regulations etc. in place, I struggle to wrap my head around how people would so readily accept that they could just give someone money and they'd give them back loads more money just .... because? and not want to question how any of that would or could work?

When I bought if I'd waited any longer to think I would have missed out, I nearly did as it was. We had joint miras then which was given the chop a couple of years later. Then the market crashed hard.

 

[Slam62]

That is A LOT of words to demonstrate lack of understanding of what equity release is.

No it's not equity release, we didn't ask for it, they didn't check we could afford it. Not even sure equity release was a thing back then. Plus the costs were a lot less than equity release like zero apart from the discounted mortgage rate.
You clever chaps would have taken all the money and bought some magic beans, or bitcoin as they're now called.

 

[CapitalOne]

Well the 2000s were even worse from that point of view, remortgaging was the thing to do.
At one point I had a Barclays mortgage (Woolwich) which was offset, we kept remortgaging to get a better rate and sometimes cashback, they paid all the fees. At one point they just gave you access to a pot of money which was the difference between the mortgage valuation and the mortgage, in our case we probably could have had 100 grand , if you dipped into it you were charged your mortgage rate. We never touched it but a lot of people did.

I had a Virgin One Account, basically your mortgage as an overdraft. It worked out well for me because when I got divorced I just got the place revalued and paid the witch off with “a cheque” (a cheque for you youngsters is like a bank note but you get to write your own number on it). I stayed in the place for a couple of years until me and the current incumbent decided to sell up to head to shangri la in the proper swinging burbs.

For the feckless though it would have been coke’n’hookers all the way to negative equity (a.k.a a “Johnson Mortgage”)

 

[dlockers]

I had a Virgin One Account, basically your mortgage as an overdraft. It worked out well for me because when I got divorced I just got the place revalued and paid the witch off with “a cheque” (a cheque for you youngsters is like a bank note but you get to write your own number on it). I stayed in the place for a couple of years until me and the current incumbent decided to sell up to head to shangri la in the proper swinging burbs.

For the feckless though it would have been coke’n’hookers all the way to negative equity (a.k.a a “Johnson Mortgage”)

This post is like a "Walkman" in text form. Understood a bit; now singing Blue Da Ba De Daba Do.

 

[CapitalOne]

This post is like a "Walkman" in text form. Understood a bit; now singing Blue Da Ba De Daba Do.

Yeah well I’m on holiday and a few beers in, respect your elders you scallywag I’m here to lighten the mood.

 

[Slam62]

This post is like a "Walkman" in text form. Understood a bit; now singing Blue Da Ba De Daba Do.

Yeah but mate... Really?

 

[Dano]

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.

Yep, I took out an endowment mortgage in '98 and while I was informed it might not pay off the full amount it was massively downplayed and that the likely result was a large lump of cash in my pocket at maturity, that's October this year, it's currently about 9k short on a 46k mortgage, not an insignificant percentage, the only real reason I'm chill about it is that I've already paid the mortgage off so I won't be scrambling around trying to get a loan for the shortfall, doesn't mean I'm overly happy about it though.

 

[Colonel_Klinck]

When professional Financial Advisers working for a bank tell you that you will receive so much at the end of 20 years there were no danger signs. I really don't know how many times we can say this.
If these words had come from R Jones & Son Loan Company I'd understand your comments but it came from the very people you should have been able to trust with your money.
I'm glad that because of us and those involved in Pension Scams etc you now live in a World where everything has to be laid out in front of you and they aren't allowed to tell you lies and take you for a ride.

I just don't think people born after this understand how different life was then. In the 60s-70s people trusted these institutions. Most people had a relationship with their bank manager. The idea he would screw you over just wasn't a thing. Then the 80s arrived, Thatcherism changed the country and the institutions. Everything became about short term gain, Yuppies, Time Share scams, the housing market changed, banks and building societies sold mortgages to people who should never have had them because they wanted the commissions. I can remember you could have several houses on a street being repossessed in the 80s recessions.

 

[Angilion]

That's what I was trying to understand, so people thought they were effectively being sold a savings account but with a different name and astronomical returns, with no reason to question how or why such massive returns might be possible.

I'm still not sure how it passes the common sense test personally, you rarely get something for nothing and even without modern financial regulations etc. in place, I struggle to wrap my head around how people would so readily accept that they could just give someone money and they'd give them back loads more money just .... because? and not want to question how any of that would or could work?

In my case it was because I assumed that the independent financial advisor was giving me sound financial advice. I think the reason it seems so unbelievable to you is because it's not normal now. It was normal then. All the banks and building societies were involved and financial advisors advised it. Many people who didn't know the financial market trusted people who did. Many people took the advice they were given by professionals in the field.

I don't think it would have been simply common sense to assume that all the banks, all the building societies and all the financial advisors were being deliberately misleading. Maybe people were more trusting back then. Or more gullible. Or less cynical. Or something.

We didn't get accurate yearly projections, either. Nobody knew anything until it all hit the fan. I ended up having to sell my endowment for less than I had already paid in and make an overpayment repayment mortgage arrangement to cover the shortfall.

I still count myself lucky because I was able to do so. The price of housing has become completely unreasonable nowadays. It's become worse and worse for at least the last 70 years, but I lucked into the tail end of it being affordable.

 

[Werewolf]

For those that seem to have trouble believing that the financial advisers were often not actually working in the customers best interest.

It's really odd how it took a change in the law and a complete change in regulation for ALL adverts about anything remotely to do with stocks to state clearly that the value might go down as well as up.
IIRC that disclaimer wasn't there until some time in the 90's.

And then in the 00's we had the banking crash and the PIP mis selling, the first of which was the banking experts apparently not knowing what they were doing (what was that about how consumers were meant to be fully aware of everything?), and the second was a product being sold to consumers without making it clear what it covered (does this ring any bells?).

 

[Hagar]

Mind you there is a hankering for the good old bad old days before the leagues of phone scammers and misinformation artists.

I would have their balls, if they had any.

 

[dowie]

Or put it this way, it makes people, or in this instance, EXPERTS, accountable for their actions.

It's not always that clear cut, the comparison with a bodged medical procedure from the other poster isn't too helpful, operations and other procedures do come with risks and so something not working out because of that known risk isn't necessarily grounds to sue, on the other hand a surgeon being negligent perhaps is.

In the case of IFAs they're not necessarily "experts", certainly not back then... they've tried to reform things into a more consultative approach these days (and the multiple guess exams they need to pass are supposed to be at 1st-year university level rather than at A-Level equivalent) but before those reforms, plenty were very much salespeople with some basic personal finance knowledge.

It was a little wild West, although as ever with financial products the majority of the population never understood. I had a friend who was selling them and he had to produce a low, mid and high investment return.
It was always the same in his words and what I saw.
1) People would ignore the low after being told it was based on returns below what the market had performed in recent times. So 1 mentally dismissed.
2) People would base their outgoings on the average
3) People would get the extra from the higher into their heads and expect something like a car worth of extra at the end.

I mean literally 9 out of 10 would think like that by the time they had ended their session with an IFA.

Most mis-selling was not really, but the companies couldn't defend their positions in many cases with no documentation to back it up.

For most people endowments were not that much of an issue, but plenty never bother to check anything so when suggestions (they pretty much always were suggestions until the very end) came for upping payments many just ignored them.

^^^ this, mentioned it earlier, in some cases, there may have been a Dell Boy type IFA who has skipped over that sort of thing, in other cases the risks were explained but the company doesn't have the paperwork anymore so can't prove that and the customer gets to jump on the compensation bandwagon not because they've been missold but because they simply took a loss on a product they actually knew had some risk and agreed to take that risk.

There isn't anything inherently bad about them or at least not at the time when there was tax relief on the payments into the endowment policy/investment side of things.

I don't quite follow the no internet in those days argument... you don't need to browse customer review sites or forums to understand there is a risk there (and frankly at the time plenty of people may have been recommending endowments on forums had they existed anyway), you'd just need to know what you're buying, namely that there is an investment in the stock market.

There would have been annual statements too and at some point, plenty of people would have been written to specifically to warn them that their endowment is not on track to cover the full amount and so they ought to make additional arrangements. That's just life though; if you want to try and aim for higher returns by taking on some risk then it can go the other way too (same as any investment); the case for misselling AFAIK is where there isn't paperwork in place to show the customer is willing to accept the risk etc.. and can then claim they were totally unaware of it (which may or may not be the case) in the event their policy doesn't perform well.

 

[Werewolf]

One of the reasons people keep mentioning the internet is because back in those days you couldn't find out the information yourself easily (if at all), so if as several people who experienced it have said in here, you go to multiple advisors and they all play down any risks or don't mention them, then how were you, back in the days of card catalogues at the library going to find out the truth yourself? Most people didn't have time to become a chartered accountant, or take a course in investing and finance to cover themselves for a mortgage.

People trusted financial advisors, you likely stayed with the same bank with the same primary staff for your entire life, or until you moved away where you likely just changed branch, some of the financial advisors involved might have been known to the person for years as a face in the branch, and might well have been used to deal with things like insurance*.

You as a customer didn't know how many of these financial products worked, and relied on the person selling it to tell you, everyone from brickies to brain surgeons got caught out on it, so it's not exactly like it was just the thickies or those that didn't pay attention, when you get a financial scandal that the companies involve basically roll over on, you know there was something dodgy going on with a great deal of frequency as otherwise they'd be fighting it tooth and nail (it tends to indicate they've worked out it's cheaper to deal with the compensation and keep it as low as possible rather than draw even more attention and potentially pay out more on top of a lot of added costs).




*This was at the time when you were usually required not just to get insurance to cover your mortgaged house, but get it with the mortgage companies preferred company, if not the provider themselves (IIRC unbundling of that only happened mid 90's).

 

[platypus]

Not really, the younger generation just slam everything on tic and try to pretend it's ok.

I love how there's loads of boomers here claiming they couldnt possibly be held responsible for not checking how things where going on a 20 year mortgage; blithly stating "this is how it was then", and yet lumping all "youngsters" together, despite them having been sold dodgy financial products and they "should know better"...

 

[dowie]

We weren't told it was investment backed.
Call me a liar, you and others are now getting on my nerves because you think you know it all.
I'm out.

I don't understand this tbh. I fully appreciate the IFAs/mortgage brokers back then were sometimes total cowboys but it seems very odd that there was no explanation for how you'd end up in profit, I mean where did you think the returns would come from? You must have had some paperwork when you were sold the mortgage & policy even if the IFA was a Dell Boy?

Also, you were presumably paying both your mortgage and a payment into your endowment policy each month... you'd get an annual statement sent to you that shows it isn't just some savings account (I mean that would just be a repayment mortgage with an extra step so why would you want that?).

The misselling is one thing but the not even knowing what an endowment is hard to understand given the above and seems a bit like this TikTok clip (presumably a sketch) about a guy not understanding what a car lease is:

https://twitter.com/i/web/status/1650169537944322048

 

[platypus]

In my case it was because I assumed that the independent financial advisor was giving me sound financial advice. I think the reason it seems so unbelievable to you is because it's not normal now. It was normal then. All the banks and building societies were involved and financial advisors advised it. Many people who didn't know the financial market trusted people who did. Many people took the advice they were given by professionals in the field.

I don't think it would have been simply common sense to assume that all the banks, all the building societies and all the financial advisors were being deliberately misleading. Maybe people were more trusting back then. Or more gullible. Or less cynical. Or something.

We didn't get accurate yearly projections, either. Nobody knew anything until it all hit the fan. I ended up having to sell my endowment for less than I had already paid in and make an overpayment repayment mortgage arrangement to cover the shortfall.

I still count myself lucky because I was able to do so. The price of housing has become completely unreasonable nowadays. It's become worse and worse for at least the last 70 years, but I lucked into the tail end of it being affordable.

The thought of going to into such a financial commitment without more information seems naieve at best to me, how could an entire generation be so ill informed? Gullible certainly. More gullible? I don't think thats necessarily fair, there are a lot of scams these days just a bit more sophisticated (I think).

At least you recognise you lucked into the housing market being affordable. That's more than a lot of boomers will admit.