Endowment Mortgage

There are two methods of paying back a mortgage. The traditional way is called a repayment mortgage. Each month's mortgage payment pays both the interest on the loan and some of the capital you have borrowed. As long as you pay your mortgage commitments on time, your mortgage loan will be repaid at the end of the mortgage loan term.

The other repayment method is the 'interest only' method. You pay interest on your mortgage loan. At a future decided date, often over 25 years, you must pay back the capital sum you have borrowed. The way that many people repay their loans is with an endowment policy. This is normally called an endowment mortgage

Since the late 1990s, due to the world economic slow down, worldwide stock markets have experienced a major loss of confidence with investors, which as a consequence, have meant their growth rates have dramatically reduced. The performance of endowments plans is dependent upon a good continuous growth rate of the world's stock markets.

Endowment investors, over the past 3 years, have been receiving negative endowment performance reports from endowment providers. This means that these policyholders would, consequently, may not be able to fully repay their mortgage loans with the endowment mortgage when the mortgage provider requires them to. Furthermore, since the late 1990s many people, in and out of the financial services industry, have expressed concerns about the sales procedure, which potential endowment policy holders experienced, when they discussed their mortgage requirements with institutions. It is now been widely agreed that many of the endowment policies may have been mis-sold to clients.

These two events, the performance of the policies and the endowment mis-selling scandal, have, as a consequence meant that many millions of people with domestic mortgages are very concerned about how they will fully repay their mortgage loans in the next 10 to 25 years.