Concern over endowment loan survey

UP to two-thirds of endowment mortgages could fail to pay off their loans according to a shock new survey.

The survey, which is understood to have been carried out by the Irish Insurance Federation (IIF), found that at a 6% fund growth, two-thirds of policies will fail to clear mortgages at maturity.

Even at an 8% return, up to 50% of those with endowment mortgages could be faced with a black hole, forcing them to borrow further in order to pay off their mortgages.

Up to 50,000 mortgage holders could be in serious trouble if the findings are true, according to the Consumers’ Association of Ireland (CAI).

The CAI has called on the IIF to spell out the position so that endowment mortgage holders know the true position regarding their home loans.

Eddie Hobbs, director of the CAI and its spokesman on finance, said: “We are not making any accusations at the moment. But let them answer the questions we have put to them”.

Under the Consumer Protection Act, those with endowment mortgages are entitled to a five-year review of their investments.

Mr Hobbs said that, based on the document in his possession, it is not at all clear that the policy holders have their statutory rights upheld by the IIF.

Mr Hobbs said it was up to the Department of Enterprise, Trade and Employment to ensure that the rights of consumers are protected.

In a statement, the CAI called on the IIF to answer the following questions:

Has the IIF completed a survey earlier in 2003 across members’ life offices on endowment mortgage policies and if so why was there no public announcement?

Did the survey reveal that at a 6% per annum fund growth, two-thirds of policies will fail to clear mortgages at maturity and that at 8% growth 50% of endowment mortgages would fail to deliver?

Did the survey indicate that life offices cannot precisely identify or confirm the total number of such policies linked to mortgages?

The CAI is also asking the Irish Brokers Association if it has met and discussed the issue of endowment mortgages either formally or informally with the IIF either this year or last year.

Mr Hobbs said the information in his possession suggests the insurance industry does not know the number of endowment mortgages currently exposed due to the poor stock market performance.

Earlier this year, Brian Woods, financial director of Ark Life warned that endowment mortgages due for maturity in the next few years would be in serious trouble due to the slump in the stock markets.

Mr Hobbs said his basic concern is that there are thousands of unsuspecting home-owners out there who have not been alerted to their plight.

He said he simply wants the situation clarified at this juncture to allay any concerns the CAI has on the basis of the information that has come into its possession.

A spokesman for the IIF said the “situation is not anything like as serious as it was when Mr Hobbs made his name on the endowment mortgage issue 10 years ago”.