Gloomy outlook for endowment mortgages

05/03/2010

The Bank of England's decision to hold its base rate at 0.5 per cent for the 12th consecutive month may be good news for households with variable rate mortgages, but the financial problems faced by families with endowment mortgages look to be getting worse.

Some of the biggest lenders admit that the vast majority of their endowment mortgage holders will face a shortfall when they mature. Two million are set to mature by 2015, and only one per cent of those will have enough funds to buy the house, according to Your Mortgage.

That could mean that homeowners have to remortgage in order to continue making home repayments – something which some retired people will not be able to do. Many will need to carry on working to deal with potential debt problems caused by the endowment shortfall.

Alternatively, they could have to fall back on savings or release some of the equity in their properties.

At worst, they could lose their homes if they find themselves unable to pay the shortfall.

EuroDebt director Vance Parsons says: "A shortfall in the endowment is likely to come at the worst possible time when you are typically over fifty five and sustaining income maybe a problem, with the risk of debt problems. We have a large number of over 60 clients still with a mortgage and an average of over £29,000 of unsecured debt."

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