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

[Hagar]

You say that - but it wasn't just "at the time". It was for the 20 years the thing ran for.

There were 15 years of reasonable returns when interest rates were high. Then about 97 when Brown let the bank loose on fixing rates and also took a dip into the pension funds, things were not so rosy. Remember Prudence, bank rates were dropping and all the endowment firms were predicting losses with 10 years left on the term. I had one that covered it's return to pay off a portion of my mortgage. The rest I cashed early at a loss.

Endowments were sold as basic or with profits but even the basic ones were sold as having profit built in and the with profit ones barely made the cut at the end.

I don't see how you can be so smug when with all the information at your fingertips, you are now in a hole for 4k a month mortgage and potential future rate rises. Most people in that time cut their cloth a lot closer. You must be rolling in cash.

 

[200sols]

Yes but it would certainly not meet modern standards.
E.g. it always had the investments may go down as well as up spiel, although I think that was improved on specifically after this issue.

Yes I'm just questioning people saying they weren't aware this could happen not the IFAs pushing them.

 

[potatolord]

It's all coming back now.

It was a world where it was close to impossible to research the relative benefits of financial products as I recall.

I was sold an endowment, and told it would pay the mortgage and provide an additional lump sum by a supposed expert financial adviser. My dad, without an Olevel to his name told me to go repayment.

I took the expert advice- why wouldn't I?

I do remember being heavily pushed to take out PPI, too. I refused that, under heavy pressure, as it was obviously total rubbish.

A few years later I realised the endowment was ****- the first two years nearly all went on commission. I was living a chaotic lifestyle, but still paying the mortgage. I tried to get out, but couldn't without a penalty fee. i was fuming with natwest, and sent loads of letters to them (pre-internet days), but kept getting the same answer.

I switched as soon as I could get out, and think I paid some sort of penalty. I was an irresponsible idiot then and would quite likely have cut my nose off to spite my face. The thing is, even with a penalty fee, it was probably the right decision.

I switched to repayment at that point.

People who weren't around in the 80s/ 90s probably don't understand how hard it was to get quality information of financial products back then.

 

[Hagar]

People who weren't around in the 80s/ 90s probably don't understand how hard it was to get quality information of financial products back then.

Or even to get a mortgage.

 

[DXP55]

I was talking to my neighbour yesterday about buying a house and he said the first one he went to buy he nearly didn't get mortgage as his income was £12- 10s - they said he didn't earn enough -He needed £12-10s-6p pw

 

[drakulton]

.

 

[Feek]

You say that - but it wasn't just "at the time". It was for the 20 years the thing ran for.

Go back and re-read my first post about the subject. In my case, it was far fewer than twenty years before I dealt with it.

Hands up, I made a mistake later in that I thought we'd done something about it. In fact, I was utterly convinced that we'd set something up so that it wouldn't be an issue once maturity date came up. What happened? I have no idea.

 

[Werewolf]

It's almost as if those who didn't have internet have never known a world without internet. It's like before internet it was impossible to make an informed decision?

It's very hard to make an "informed decision" when pretty much every place you go to for information on which to make that decision is skewed towards one thing and keeps giving you information for that because that's how they make their money.

Back in the 80's and 90's when these mortgages were at their peak the closest you might get to a computer as something you could use was likely to be a BBC B or a ZX spectrum, there was no internet and if you wanted to research something yourself you had to go the library and start hunting through the books, often involving going to the indexes (card or microfiche, if you were really lucky by about 1990 your library might have a computerised terminal to search the catalogue), and start looking for books that were typically never intended for a casual user, or randomly start buying physical magazines and books about it and trying to work out what they were telling you, oddly enough most of the magazine articles would likely have suggested endowments as that was what the advertisers were trying to sell you.

 

[Grimley]

Here's my story on endowment mortgages in the late 80s early nineties.
When I helped my nan buy her house in the late 80s, endowment mortgages were very popular and we decided to go down that road, so it's basically a interest only mortgage with a separate payment for the endowment, where the view that the endowment would pay off the lump sum at the end of the term on a sesame seed bun etc. About 7 or 8 years in, the tabloid newspapers started to bleat that said endowments would result in a shortfall at the end of the term, so I contacted the mortgage providers if I could change the mortgage from an interest only to a repayment mortgage. Payments increased slightly but it wasn't really an issue for me. I'm quite glad that I did that because the end of the endowment, because I carried on paying the endowment payments until it's maturity, a 30% shortfall. So i would have ended up having to take out another mortgage to pay the shortfall which I wouldn't have been too happy about. I'm just glad that I acted on the advice of the tabloid newspapers at the time, not that I will do that now as most tabloid newspapers would have us believe that the moon is made out of cream cheese.

 

[dlockers]

I don't see how you can be so smug when with all the information at your fingertips, you are now in a hole for 4k a month mortgage and potential future rate rises. Most people in that time cut their cloth a lot closer. You must be rolling in cash.

Aye but I am well aware it is going up to £4k and am planning accordingly. I'm not just waiting to wake up in March and then complain on an internet forum.

 

[MikeTheNative]

Here's my story on endowment mortgages in the late 80s early nineties.
When I helped my nan buy her house in the late 80s, endowment mortgages were very popular and we decided to go down that road, so it's basically a interest only mortgage with a separate payment for the endowment, where the view that the endowment would pay off the lump sum at the end of the term on a sesame seed bun etc. About 7 or 8 years in, the tabloid newspapers started to bleat that said endowments would result in a shortfall at the end of the term, so I contacted the mortgage providers if I could change the mortgage from an interest only to a repayment mortgage. Payments increased slightly but it wasn't really an issue for me. I'm quite glad that I did that because the end of the endowment, because I carried on paying the endowment payments until it's maturity, a 30% shortfall. So i would have ended up having to take out another mortgage to pay the shortfall which I wouldn't have been too happy about. I'm just glad that I acted on the advice of the tabloid newspapers at the time, not that I will do that now as most tabloid newspapers would have us believe that the moon is made out of cream cheese.

My parents bought in 92 and had an endowment mortgage as well. They also transferred out of after a few years. Probably cost them a few extra years of having a mortgage but at least they didn't put their head in the sand over it. They went to their local bank spoke to the 'trusted' advisor who told them have an endowment mortgage. Turns out he was telling everyone to have one....

 

[Pipe & Slippers]

The monthly costs of an endowment backed mortgage were always pitched lower that the equivalent repayment mortgage, and the projected growth rates on the endowment were astronomical (8 - 10%) - it was no wonder it turned into a huge scandal when people took trusted IFA's, less that "I", advice. The only "I" in that acronym was themselves. This was a time when the public were very trusting of professionals - the whole point in going to them was to get the best advice because they were the experts. It was like going to the dentist - if they said you needed a tooth out, you agreed to let them do it

I moved out of my endowment in '96, 3 years after I took it out, as people have said, the first 2 years payments were commission going to the IFA

The one thing that really got me when I took out my first mortgage was the bizarre insurance policy you were forced to take out by the mortgage company, indemnifying them against your non-payment. It was a policy that lasted for the term of the mortgage, usually 25 years, but lapsed, without refund, when you took out a new mortgage. I can't remember the ins and outs of it now, but my recollection was it was ~£1,500 on a £60k mortgage - it seemed really unfair at the time, but all mortgage providers did it

 

[Mercenary Keyboard Warrior]

The monthly costs of an endowment backed mortgage were always pitched lower that the equivalent repayment mortgage, and the projected growth rates on the endowment were astronomical (8 - 10%) - it was no wonder it turned into a huge scandal when people took trusted IFA's, less that "I", advice. The only "I" in that acronym was themselves. This was a time when the public were very trusting of professionals - the whole point in going to them was to get the best advice because they were the experts. It was like going to the dentist - if they said you needed a tooth out, you agreed to let them do it

I moved out of my endowment in '96, 3 years after I took it out, as people have said, the first 2 years payments were commission going to the IFA

The one thing that really got me when I took out my first mortgage was the bizarre insurance policy you were forced to take out by the mortgage company, indemnifying them against your non-payment. It was a policy that lasted for the term of the mortgage, usually 25 years, but lapsed, without refund, when you took out a new mortgage. I can't remember the ins and outs of it now, but my recollection was it was ~£1,500 on a £60k mortgage - it seemed really unfair at the time, but all mortgage providers did it

MIG. Mortgage indemnity guarantee.
It was indeed painful, it was something like 3% of amount over 75% LTV.
8% was not unreasonable at that time. What was unreasonable was expecting it to remain at that with the target of much lower inflation.

Here's my story on endowment mortgages in the late 80s early nineties.
When I helped my nan buy her house in the late 80s, endowment mortgages were very popular and we decided to go down that road, so it's basically a interest only mortgage with a separate payment for the endowment, where the view that the endowment would pay off the lump sum at the end of the term on a sesame seed bun etc. About 7 or 8 years in, the tabloid newspapers started to bleat that said endowments would result in a shortfall at the end of the term, so I contacted the mortgage providers if I could change the mortgage from an interest only to a repayment mortgage. Payments increased slightly but it wasn't really an issue for me. I'm quite glad that I did that because the end of the endowment, because I carried on paying the endowment payments until it's maturity, a 30% shortfall. So i would have ended up having to take out another mortgage to pay the shortfall which I wouldn't have been too happy about. I'm just glad that I acted on the advice of the tabloid newspapers at the time, not that I will do that now as most tabloid newspapers would have us believe that the moon is made out of cream cheese.

You did the best scenario. As I said many cancelled which was daft unless you were on the breadline, treating the endowment as savings was the best thing to do.

 

[Mercenary Keyboard Warrior]

I just remembered that they banned the front loading of commission at some point.
Up until a certain point you did pay just the commission for a while, they made it a percentage after a while so that you couldn't pay for a while and have nothing earning.

 

[SexyGreyFox]

We weren't given low, average and high figures. We were told that at the end of the product lifespan, we would have xx thousand pounds to pay off the mortgage and 'a large lump sum'. All the advisors told us this, there was no real discrepancy between them apart from a few quid difference on the monthly figures.

I'm sure that @SexyGreyFox will concur with this, as will others in here.

This is how it was, this is why it was such a scandal when it finally imploded on itself.

Everyone belittling us for 'not doing our research' does not understand what actually happened then. We did the best research that was possible at the time.

It was 1983 and we went to the Halifax and somebody else me and the wife can't remember.
We played one off against the other with their professional Financial Advisers and both of them went down the Endowment route.
Not one of them mentioned stocks and shares which may go up or down, we were told we would pay off the £14,000 mortgage and will receive £16,000 and no mention that that lump sum all depends on what we the bank gambles on, if that was the case we would have had another type of mortgage.

Because of that scam and Pensions etc the laws were changed and these people can't tell you lies any more, they have to go through every scenario with you.
My most recent talk with financial Professionals was contacting PensionWise which was setup by the Government because of the scams.
After he went through every option I then felt confident to ring my Pension Company and tell them what I wanted - a lump sum and so much a week.
He said he was under the law to give me all the options and to record it even though I knew what I wanted so I had to sit there for 30 minutes while he explained my four options and one of them was a risk so that was out of the window.
I still opted for a lump sum and a weekly payout but it also showed how much these scams by professional bodies had now got to be protected.

Like I said in another post, both my daughters can spend an hour explaining every option with people in debt and aren't allowed to give them bad advice.

it is getting on my **** that there is 'those who know everything' in this thread who have zero idea what we went through back then and are looking at us like idiots who don't know how to do money.
You have to ask why the Government had to get involved in these banking lies.

 

[Em3bbs]

I'm just glad I wasn't one of these people who were fooled in the 1980s/90s, nor so I know anyone who was. Maybe we were all just lucky.

 

[dlockers]

it is getting on my **** that there is 'those who know everything' in this thread who have zero idea what we went through back then and are looking at us like idiots who don't know how to do money.
You have to ask why the Government had to get involved in these banking lies.

It is not a personal attack, it is just VERY hard to understand where this magic money was intended to come from, and risk/reward wasn't just an obvious conclusion.

 

[Kenai]

Even with the internet, would the endowment problem have been any different?

The industry was making assumptions on what it (thought it) knew about the market and how things would pan out in the future - would a hypothetical internet back in the day actually have said anything other than 'Endowments are amazing, you'll have all the monies! *cough* There's a risk but don't worry about that, look the market has been increasing steadily forever, it cant go wrong' anyway?

It may have helped alert people sooner to the impending disaster they were facing once it all started to unravel but I can well imagine sites like MSE would have been all aboard the endowment train at the time, if they existed.

 

[Rroff]

I'm just glad I wasn't one of these people who were fooled in the 1980s/90s, nor so I know anyone who was. Maybe we were all just lucky.

I think a good number of people who were "fooled" by it willingly ignored the danger signs.

 

[Feek]

I think a good number of people who were "fooled" by it willingly ignored the danger signs.

For goodness sake. How many times do we need to say it? There were no danger signs.

it is getting on my **** that there is 'those who know everything' in this thread who have zero idea what we went through back then and are looking at us like idiots who don't know how to do money.

I’m getting to the stage where I wish I’d just left all the posts deleted and not moved them to a new thread.