Endowments are investments that are designed to repay
a mortgage at the end of the mortgage term and included life assurance that
would repay the mortgage in the event of death and\or critical illness. They
were very popular until the mid to late 90's.
During the mid 90's inflation began to fall significantly and this led to lower
investment returns. Most endowments were designed to repay a mortgage if the
investment return averaged 9%-10%pa, this was overoptimistic during periods
of low inflation.
To overcome lower investment returns policyholders would be required to increase
their contributions but this was not palatable to many people when other investments
like PEP's and ISA's looked better value in terms of historical performance
and more favourable tax treatment. Better still was the traditional method of
repaying a mortgage (capital & interest method) which carried no risk.
When the stock market crashed during 2000 many life assurance companies cut
back their bonuses on endowments linked to With Profits funds. This compounded
the problems when life assurance companies provided their policyholders with
performance projections. This led to the demise of the endowment policy after
many successful years of repaying mortgages.
If you want to consider an investment to repay your mortgage then an ISA or
Pension may offer better prospects than an endowment.
 |
| Mortgages-Online: awarded 2nd place best online
mortgage adviser 2007 |
| |
| YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON
A MORTGAGE SECURED ON IT |
| |
Mortgages-Online Ltd
19 Weekday Cross
The Lace Market
NG1 2GB |
