You are likely to see increasingly numbers of adverts targeting people who have taken out interest only mortgages since 2004.
The practice of offering interest only mortgages became popular in the eighties as stock markets were rising and for some people taking an endowment policy with the mortgage meant that the endowment (usually invested in the stock market) could pay off the mortgage at the end of the term and leave them with a capital sum as well. Everybody wins.
They became very popular with millions of people, avoiding the standard repayment mortgages and opting for interest only mortgages instead.
However, with repayment mortgages you will have completely paid off the mortgage when you reach the end of the 10 years, 25 years or whatever term was agreed. But, the same is not true for interest only mortgages with endowment policies and many people found that at the end of the mortgage the endowment had not grown enough and there was a considerable sum to repay in order to complete their mortgage.
Claims Management Companies
Claims management firms that have previously concentrated their efforts on the PPI market may well look to mortgages to expand their business.
The mortgage industry is preparing for even more activity from such companies following the recent release of a report by the Financial Conduct Authority. In it, the City regulator said almost half of all people with interest-only mortgages – about 1.3 million homeowners – may not have enough money to pay off their home loan when it matures, and face an average shortfall of more than £71,000.
The FCA has asked lenders to contact their most at-risk customers – those whose loans are due to be repaid before the end of 2020 – within the next 12 months to help them find ways to address the shortfall.
However, the head of the FCA, Martin Wheatley, said the regulator had not found mass evidence of miss-selling. "This is not one of those complex products. It is what it says on the tin".
The FCA review concluded that the vast majority of people were fully aware of the conditions of the mortgage they took out". Even if you weren't aware of the terms of the loan it doesn't mean you weren't told about them.
He added: "If you do think you have got a valid complaint there is no need to use a claims management company. You can make that complaint yourself directly to the Financial Ombudsman service, which is free.
Some companies offering to help with mis-selling claims charge an upfront fee, often hundreds of pounds, while most take at least 25% in commission from any successful payout.
The Which consumer website has a lot of information about various problems to do with mortgages
· Endowment policies
· Interest Only Mortgages
· Remortgaging to clear your debts
· Household budget analysis
· Self-Certification mortgages
· Mortgages running past retirement
· High broker fees
Which has a lot of advice about endowment plans and what to do if you feel you may have been subject to mis-selling.
But, just because your endowment hasn’t grown as much as hoped for, doesn’t mean there has been mis-selling.
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