The mass cancellation of endowment policies during the 1980s and early 90s may prompt a repayment crisis in the near future for those borrowers who failed to replace their mortgage repayment vehicle, writes Paul Robertson.
In the 12 November issue, Mortgage Solutions reported that pension-backed mortgages could become the next mis-selling scandal, as concern mounts that borrowers could struggle to repay loans due to pension funds underperforming.
This prompted Alan Kirkham, managing director of IFAs Three Spires Insurance Services Ltd, to highlight a another potential problem.
He wrote: ‘There is another problem looming that in my opinion is even worse. Those who had endowment mortgages in the 1980s who, when times got hard, simply cancelled the endowment policy to save money. They now have no means of repaying their debt.
‘In my experience, most of those who cancelled policies did so in the early 90s, when there was a lot of unemployment, to save money. Many have subsequently moved house or remortgaged, but there are some who have done nothing. There may not be many, we do not know, but they are out there.’
It is difficult to estimate the size of any problem as lenders do not hold records of repayment vehicles used by borrowers.