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Is the UK on the verge of another endowment policy crisis?

In what is sure to be an area of concern in the future for many homeowners in the UK, it has been revealed that up to 99% of endowment policies sold by some UK insurance companies may ultimately fall short of their intended target. Many people use these to pay off their homes after covering interest directly over the mortgage period and paying additional sums into their endowment fund.

This is certainly a case of déjà vu for the UK market with a similar situation arising just over a decade ago which saw hundreds of thousands of home owners informed that they would need to increase their payments to ensure that their endowment covered their outstanding mortgage. While the recent fall in worldwide stock markets and property prices has obviously had a massive impact upon the value of endowment funds many people will be shocked to find out we are on the verge of another crisis in the endowment market, although this time it could be much worse.

Large numbers of UK homeowners will be sitting pretty today assuming that their endowment will pay off their mortgage upon expiry only to find out that they could be left tens of thousands of pounds short. To compound the problem, property prices have fallen in the UK which will further devalue what is the main asset for the vast majority of the UK public, i.e. their home.

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