by CLARE KITCHEN, Daily Mail
One of the big banks yesterday admitted that most of its endowment mortgage holders face a bill for thousands of pounds when their policies mature.
Lloyds TSB said its policies are performing so badly that half of the 270,000 it has sold are at serious risk of leaving owners in debt.
Another 124,000 are estimated to have a chance of leaving a shortfall, while only 10,800 are on track to cover the mortgage.
It is thought to be the worst example of the problems surrounding endowments, many of which were mis-sold to home-buyers by salesmen eager to bump up their salaries with commissions.
The huge numbers of Britons mis-sold endowment mortgages could cost the life assurance industry more than £1billion in compensation, the latest estimates say.
Lloyds TSB chose to reveal the scale of its problems after the Financial Services Authority stipulated that all insurance companies must let customers know the state of their policies by the end of this month.
It has shown that six million of the ten million endowments in Britain are underperforming and may not cover the cost of the loan.
Lloyds TSB blamed ‘changes in the economic environment’ but claimed that many of the policies were new and had not had time to benefit from long-term exposure to the stock market.
The scale of its problem has shocked mortgage experts. It compares with Scottish Amicable, where just under half of the policies are definitely on course.
Scottish Amicable has written to virtually all 817,000 policyholders and so far just two per cent of endowments are seriously at risk, while 49 per cent are risky and the rest are on course to cover the loan.
In contrast, all of Standard Life’s 1.6million policies are on track. The company has promised to stand by all policies and top up any shortfalls provided future investment returns are at least six per cent a year.
A spokesman for the Financial Services Authority said policyholders should not panic as many under-performing policies could improve.
‘Our advice is not to take this as a final verdict on your policy,’ he added. ‘The market goes up and down, so policies that are not doing so well can improve. But people should still be aware there is risk.
‘They could either take out another policy to top up the shortfall or switch to a repayment mortgage.’
Some 300,000 people are estimated to be entitled to compensation from the mis-selling scandal, according to the Financial Ombudsman Service, which is receiving 400 complaints a week and expects up to 30,000.
It generally sees about one complaint in ten after policyholders fail to get satisfaction from the company which sold them the mortgage.
On average, it is finding in favour of the policyholder in about half of the complaints it investigates.
The FSA says the compensation awarded is on average £3,331.
The largest group of successful complaints are by people who were not properly briefed about the risks of investing in a policy which is linked to the stock market.