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

[Werewolf]

How many people are qualified and have the time and experience to fully understand what are (or were at the time) complicated documents involving things like the law and compound interest, especially when it also involves things like the stock market?
This isn't about "personal responsibility" it's about being able to trust people whose job it is to advise you honestly on complicated matters that you are not qualified to understand.

In my parents case it was lucky that my mother was always extremely good at maths*, and had some history working with complicated numbers (she was employed at one point in her late teens at an insurance company as one of the people doing the maths for risk assessments etc from memory, way before computers did it). and she had the time to keep on top of the household finance, whilst my father who was also good at maths was willing to listen to her (mum always did the finances).


It's like blaming someone for taking their car to a dealer to have a the cambelt changed, when the engine explodes because the dealer didn't replace half the bolts and used the wrong belt.


*I think one of her biggest regrets and frustrations was that she was never allowed the chance to pursue it, her brothers all went to uni, she was told that maths wasn't for girls.

 

[SexyGreyFox]

Did the banks not send statements, report progress etc?

I just can't fathom being blind to the risk of a product that (maybe with the benefit of hindsight) is so clearly risky.

Mrs Sexy said we got one in 2002 exactly 1 year before our 20 years was up.
There were no letters/statements before that and I remember the conversation quite clearly with her.
A year later we owed £1200 and didn't get the £16,000 we were promised.
I had a drummer who was a Financial Adviser and knew his first question to customers was "Can you afford to lose this money, if not don't gamble" so we were well aware of stocks and shares etc and not once told our money all depended on how it was invested.
This was a scam by people you should trust with your money and they took 100s and 1000s for fools.

It's very easy for you and others in this thread to look at us like those sad old women who get taken in by a Nigerian scammer but it really wasn't like that.
These were people in well known banks who you should trust.

 

[gingergundog]

How many people are qualified and have the time and experience to fully understand what are (or were at the time) complicated documents involving things like the law and compound interest, especially when it also involves things like the stock market?
This isn't about "personal responsibility" it's about being able to trust people whose job it is to advise you honestly on complicated matters that you are not qualified to understand.

In my parents case it was lucky that my mother was always extremely good at maths*, and had some history working with complicated numbers (she was employed at one point in her late teens at an insurance company as one of the people doing the maths for risk assessments etc from memory, way before computers did it). and she had the time to keep on top of the household finance, whilst my father who was also good at maths was willing to listen to her (mum always did the finances).


It's like blaming someone for taking their car to a dealer to have a the cambelt changed, when the engine explodes because the dealer didn't replace half the bolts and used the wrong belt.


*I think one of her biggest regrets and frustrations was that she was never allowed the chance to pursue it, her brothers all went to uni, she was told that maths wasn't for girls.

Yeah easy to look at it now and think maybe I should have done such and such. No internet to fact check, you were kind of at the mercy of people who you entrusted to do the right thing.

 

[dowie]

How many people are qualified and have the time and experience to fully understand what are (or were at the time) complicated documents involving things like the law and compound interest, especially when it also involves things like the stock market?

To be fair compound interest re: a repayment mortgage or indeed savings and loans are something a schoolboy ought to be able to understand, though in the case of endowments, there is an additional complication in that it's stock market returns compounding so some variance to consider. The issue arises when you've got Dell Boy esq IFAs/mortgage brokers hard selling these products and chasing commissions and trying to gloss over that stuff.

The documentation is still there in most cases for people to read as are the annual statements but plenty will have perhaps just taken in the sales-patter of the Dell Boy IFA as gospel without really understanding what they're buying.

Unfortunately, not everyone can really have a legal claim to have been missold if they've been provided documentation and it does, in fact, explain the risks to them and they've agreed to them even if they've had some grade A BS-er telling them it's all "cushty". And of course, in some cases the opposite can happen too, the salesperson may well have pointed out that there are risks but perhaps that wasn't so well documented and the customer was able to just claim anyway if the markets went against them. It's a bit of swings and roundabouts.

These days you'll have a full-on explain it like I'm 5 phone call with all sorts of vague "do you prefer to be assured that what you're paying will be the same amount each month.." or words to that effect, you seemingly can't even phone up to ask what the best-fixed rate or best tracker deals are from a broker, they need to spend 40mins going through a questionnaire on a recorded call before they choose to "advise" you whether to take a tracker or fixed rate based on your answers.

You don't get many long-term fixed-rate deals in the UK these days either, unlike the US, probably just not worth it... some people will fix for 20 years and if rates fall people will want to back out of the deal and you'd have more legal cases.

 

[theone8181]

While I'm only 36, so didn't have to deal with endowment stuff, I'll point out that a lot of it was pre-internet so I doubt you'd be able to do much research (apart from asking the guys who's commission depends on you saying yes). Let's face it, the banking industry aren't exactly white knights, it wasn't that long ago northern rock were handing out 110% mortgages. I suspect a large chunk of people were not financially astute mainly because how could they be?
Back on track, has he been banged up yet and lost the car?

 

[dlockers]

While I'm only 36, so didn't have to deal with endowment stuff, I'll point out that a lot of it was pre-internet so I doubt you'd be able to do much research (apart from asking the guys who's commission depends on you saying yes). Let's face it, the banking industry aren't exactly white knights, it wasn't that long ago northern rock were handing out 110% mortgages. I suspect a large chunk of people were not financially astute mainly because how could they be?
Back on track, has he been banged up yet and lost the car?

To be fair their mortgages only represented like 4% of their salary so they still had it easy, whether they were "scammed*" or just poorly informed**.

*but not actually
**over a 20 year period

 

[theone8181]

To be fair their mortgages only represented like 4% of their salary so they still had it easy, whether they were "scammed*" or just poorly informed**.

*but not actually
**over a 20 year period

Ohh don't throw that grenade, next post will be about the massive interest rate on a small amount of money .

 

[platinum87]

How many people are qualified and have the time and experience to fully understand what are (or were at the time) complicated documents involving things like the law and compound interest, especially when it also involves things like the stock market?
This isn't about "personal responsibility" it's about being able to trust people whose job it is to advise you honestly on complicated matters that you are not qualified to understand.

In my parents case it was lucky that my mother was always extremely good at maths*, and had some history working with complicated numbers (she was employed at one point in her late teens at an insurance company as one of the people doing the maths for risk assessments etc from memory, way before computers did it). and she had the time to keep on top of the household finance, whilst my father who was also good at maths was willing to listen to her (mum always did the finances).


It's like blaming someone for taking their car to a dealer to have a the cambelt changed, when the engine explodes because the dealer didn't replace half the bolts and used the wrong belt.


*I think one of her biggest regrets and frustrations was that she was never allowed the chance to pursue it, her brothers all went to uni, she was told that maths wasn't for girls.

You do not need any math skills to figure this out, its more so higher level common sense from investing or so for a period of time.

The interest rates were high in the 80's early 90's which seems about the time everyone is talking about, the % interest of repayments was very high.

Investing in the stock market requires that you outperform interest rates, which is harder to do once they are high, especially as they are equal to or higher than the historical stock market returns at that time.

If we fast forward to 2009, it would actually be very good.

But i say this in terms of doing it myself in principal, as in, take interest only and then invest the amount that would equal total of a repayment mortgage as i dont know the terms for those mortgages or the fees they added.

Its mis-sold absolutely and IMO it can be seen from day one, we dont need to wait for the stock market performance. If anyone bought one of those mortgages i would expect them to explain interest rates, stock market historical returns and their distribution etc.

The advisors job is to teach you about those complex matters so that you can understand it, thus make a proper decision. Its not to simply tell people what to do.

 

[theone8181]

Thinking back, when we got our mortgage 13/14 years ago, they were pushing for life insurance as it was required, however I thought that legally they couldn't require it.

 

[Hagar]

We bought three endowments over the years, the one bought in 1982 promised with profits but 25 years later barely covered the sum insured.
Later ones bought in the early nineties we gave up on and cashed in as they were no longer tied explicitly to a mortgage. We lost several thousand in equity but it was not worth thrashing a dead donkey and hoping they would come good at the end.
Lucky as we would have paid more instalments right up to 2008.

 

[Slam62]

Yeah, we had a low cost interest only endowment mortgage in the late 80s couldn't get any mis selling compo so cashed it in when the stock market looked like it was at its most dodgy, it paid off most of the minimum it should have, I had loads of spreadsheets calculating interest, overpayment and end date in the end we got more interest from savings than we were being charged on the mortgage but we paid it off as soon as rates started rising.

 

[Hagar]

To be fair their mortgages only represented like 4% of their salary so they still had it easy, whether they were "scammed*" or just poorly informed**.

*but not actually
**over a 20 year period

********

 

[Semple]

My folks got caught up in the endowment miss-selling stuff as well. I think it was a family friend who had gone through the miss-selling claim and won, so they looked into it as well and got a payout from it too.

 

[danlightbulb]

I have to admit I get rather annoyed by all this mis-selling compo. It's like a reward for incompetence which I'll never get because I try to get a handle on what financial products I buy.

Same as when people get a big payout for a bodged medical procedure. I'd love to have a minor bodged medical procedure so I can get a big wad of cash.

 

[Feek]

I have to admit I get rather annoyed by all this mis-selling compo. It's like a reward for incompetence which I'll never get because I try to get a handle on what financial products I buy.

A person who is an independent financial advisor offers you what is supposed to be the best product. In fact, all the independent financial advisors are recommending the same product.

There is no internet for you to research these things. You speak to this IFA because he's independent and you can trust him. You speak to a few other advisors, they're all suggesting the same product.

When it turns out that he's not trustworthy and sells you what's best for him and worst for you, there's only really one person to blame. That's why it's called mis-selling. I don't know how old you are but things are very different now to how they were in the 80s and 90s.

 

[Raymond Lin]

I have to admit I get rather annoyed by all this mis-selling compo. It's like a reward for incompetence which I'll never get because I try to get a handle on what financial products I buy.

Same as when people get a big payout for a bodged medical procedure. I'd love to have a minor bodged medical procedure so I can get a big wad of cash.

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

How about that?

 

[200sols]

I have to admit I get rather annoyed by all this mis-selling compo. It's like a reward for incompetence which I'll never get because I try to get a handle on what financial products I buy.

Same as when people get a big payout for a bodged medical procedure. I'd love to have a minor bodged medical procedure so I can get a big wad of cash.

Nah, you seem to think everything was rosy in the past and you're the one who has been dealt a bad hand in life but alas that is not the case.

 

[Hagar]

There were basically two types of mortgage. One a variable rate repayment mortgage, two a variable rate endowment style mortgage. If you chose the latter, the mortgage provider insisted that the endowment was tied to the mortgage to ensure they were covered.

Both types has rates rising and falling with bank rates, generally a few full points above. The repayment one was normally a bit more expensive compared to the mortgage interest only plus the endowment payments. That is why they were popular.

There was no choice to pay interest only. That came along with deregulation and the untying of repayment vehicles from mortgages. Fixed rates also came along later, back in the day it was swings and roundabouts on the base rate.

Financial advisers took often undisclosed rewards and bonuses from the endowments often equalling the first years payments on the policy. Many were a bit crooked to say the least.

In addition to actually get approved for a mortgage you had to be in good standing with a building society and have a savings account with them.

 

[montymint]

This thread is definitely showing the ages of posters mind you

 

[dlockers]

Nah, you seem to think everything was rosy in the past and you're the one who has been dealt a bad hand in life but alas that is not the case.

A lot of these deals ran for 20+ years. So it isn't just ostrich behaviour at the beginning but for the next 2 decades. It just seems so utterly irresponsible.