take-up of mortgage endowment policies falls by MORE THAN ONE MILLION over last 18 months
The number of mortgage endowment policies has fallen by more than a million in less than 18 months.
ABI statistics have recorded a fall from 10.75 million endowments in June 2001 to 9.7 million by December 2002. The trade body said this is due to a mix of falling sales and a number of policies now reaching maturity or being surrendered.
It expects mortgage endowment policies to continue this trend of decline over the next few years while repayment mortgages maintain their dominant position in the market.
The ABI said there is evidence to suggest that many people have more than one endowment policy, chiefly due to holders who have moved house or rearranged the terms of their mortgage. ABI's research found that each policy holder has on average 1.5 policies, suggesting there are some 6.6 million people with a mortgage endowment policy in the UK.
It also found a number of mortgage endowments are no longer linked to the repayment of a mortgage but are being used as a standalone savings plan.
The ABI said this may be due to policy holders moving home and changing their mortgage arrangements or possibly because the mortgage has been paid off. It added that changing a mortgage contract or moving house is the single biggest reason given for selling on an endowment to the second hand market. According to FSA research, 21% of endowment policies were never, or are no longer, being used to repay a mortgage.
The ABI said that policy holders are sufficiently knowledgeable about the altered outlook for endowments. When asked about their situation in September and October 2002, some 70% of respondents who have an endowment linked to a mortgage said that they were either on track or had savings they intended to use to cover any shortfall.
ABI research found that in September and October 2002, of the individuals surveyed who were relying on their endowment to pay off their mortgage, 3.24 million people were either on target to make their full payment or would have a surplus.
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