Steep rise in endowment mortgage complaints

There is a record high in endowment mortgage complaints, new figures show.

In the 1980s millions of consumers were sold endowment mortgages, which they were told would mature and pay off their mortgages as well as probably delivering a surplus.

But the under-performance of the stock market since then means that many people are left with a shortfall between the value of the loan and the value of the endowment policy.

If this risk was not fully explained (as was the case in up to 60 per cent of cases at one point) consumers are entitled to compensation from the institution that sold them the policy.

Yesterday, the Financial Services Compensation Scheme (FSCS), the UK’s financial statutory fund of last resort, reported unprecedented numbers of endowment claims in the first six months of this financial year.

Close to 10,000 new endowment claims were received by FSCS between April and September, compared with a January forecast of 7,000 for the whole year.

"New endowment claims have been received at unprecedented levels, way beyond our expectations," said Loretta Minghella, FSCS chief executive.

"As ever the challenge for FSCS is to strike the right balance between providing an efficient and timely service to consumers with our responsibility to the industry to keep costs under control."

To try and deal with the number of claims received, FSCS is increasing in house resources while outsourcing to get through more claims and to bring processing times down.

FSCS is now anticipating as many as 22,000 new claims could be received this financial year, triple the number predicted.

Almost two claims in five are upheld - with the average compensation payment down from £2,700 to £2,300, the fund revealed.