Reuters report today that the Council of Mortgage Lenders have stated that bankruptcies pose a growing threat to the housing boom.

Bankruptices are at their highest level for 11 years.

It is likely that interest rates will rise this year, causing people who have borrowed heavily increased hardship wrt paying their debts.

This in turn will threaten the housing market, which is already under threat from the estimated £40BN shortfall on endowment mortages.

I received a message on The Forum today from Ian, who was asking for advice about writing a letter of complaint.

Here is my response, which is pertinent to all seeking to complain:

"...Thanks for your message, I am sorry to hear of your potential loss.

You are not alone, there are 6 million of us facing a £40BN shortfall.

If you need a good quality proforma complaint letter then go to the part of the Consumers' Association website, which is helping consumers draft complaint letters, it can be found at endowment action.

I would note that the time for making complaints is running out, and that those of you who have not yet done so ought to do so very soon.

Remember that when making any financial decision, take the advice of a suitably qualifed independent financial adviser and lawyer..."

Reuters report today that mortgage equity withdrawal has hit a new record of £16BN in Q4 2003, the total for 2003 being £53BN.

This being approximately 8% of household disposable income.

The withdrawn equity is being used to finance consumer spending. It is expected to top £60BN in 2004.

I would caution against this practice; borrowing long to spend short is very unwise, and is unlikely to be sustainable.

As and when the endowment mis-selling "chickens come home to roost", there is going to be a shortfall of at least £40BN which someone is going to have to finance.

Those that have overloaded their finances with extra long term debt, in order to satisfy short term whims, may find the future very bleak indeed.

I sent the following email to Milberg Weiss (the American legal firm), dipping a toe in the water to see if they can help wrt a class action.

"....I wish to ask about the possibility of taking a class action, in respect of mis-sold endowment policies in the UK during the eigthies and nineties.

During this period these products were created by life assurance companies, to be used as repayment vehicles for 25 year mortgages.

80% of mortgages in the UK used these policies at this time.

They were "hard sold" offering not just full repayment fo the mortgage, but also a tax free profit at the end of the term.

The reality is different, they are underperforming; it is expected that 6 million people will be hit by a shortfall, which is expected to total £40 billion over the next 10 years.

The life assurance companies are doing everything possible to avoid liability. They state that they were investments, and as such there was always a risk that they would fall.

The reality was that they were sold as products, like TV's or cars. There was little or no mention of risks, and the inference was that there would be no loss.

When you buy a TV or car that is not "fit for purpose" you are entitled to compensation. The same should apply here.

I have been trying to claim compensation since Sept 2002, and have kept an on line diary of my efforts "The Endowment Diary" on my website.

Are you able to help, or do you know any firm that can help?

Thanks.

Kind regards.."

Reuters report that John Cunliffe (MD of Macroeconomic Policy and International Finance in the Treasury) told a Treasury Committee this week that house prices face only a small risk of a crash.

Additionally, the ongoing rise in house prices is expected to slow as a result of the rise in interest rates.

This may be some comfort to those of us facing shortfalls on our endomwent policies.

Reuters report today that Aviva, the UK's largest insurer, has increased its provisions for potential mis-selling claims on endowment mortgages from £50M to £80M.

In its annual report, published today, Aviva said it did not believe there would be any material effect on its shareholders from costs arising from the investment linked mortgages.

Approximately 6 million people in the UK face a £40BN shortfall on these underperforming policies.

Companies have paid out more than £670M to compensate policyholders.

The FSA has fined five companies, including Royal & Sun Alliance and Lloyds TSB, over £5M for misadvising clients.

Sales of endowment mortgages peaked in 1988, when they made up 83% of the market, but have since fallen to about 5%.

I received a call from the complaints company handling my claim for the mis-selling of my second endowment policy.

In short, they cannot handle a claim that has already been rejected by the Financial Ombudsman Service.

In view of this, I would therefore question the rationale of anyone using these claims companies.

Presenting a claim to the companies that sold these polices, and then to the Ombudsman is free. However, if you use a claims company they will charge 20-30% of your compensation if they succeed.

To my view, the only reason to use these claims companies is if you have exhausted all other “zero cost” avenues of complaint. However, they do not seem to wish to pursue cases that have already been rejected.

Therefore, in my opinion, they add no value.

That being said, I did discuss the general situation regarding compensation with them. It seems that, in their view, the companies that sold these under performing products are becoming increasingly rigid in their interpretation of what constitutes a justifiable claim.

The claim company was of the opinion that the endowment providers are doing everything possible to avoid paying compensation. My own experiences, and the letters that I have received from fellow policy holders, seem to endorse this view.

I do not regard this as the end of the line in respect of my claim for the mis-selling of my second endowment. I have some other avenues that I intend to explore.

One being, and this no doubt sounds “barking mad”, is to consider the possibility of pursuing a class action via the USA.

No I have not gone mad; the European creditors of Parmalat (the Italian diary company that is Europe’s Enron - please see my article in “In Your Face” entitled “Parmalat Europe’s Enron”) are pursuing a class action against Parmalat Italy, using Milberg Weiss an American legal firm.

My view is that if the creditors of Parmalat can do this; then the 6 million policyholders, who face a £40BN shortfall, ought to be able to do it as well.

My research into the viability of pursuing this may take some time, I am of course happy to hear from anyone who has already taken this route.

I should also mention, for the benefit of the companies that sold these underperforming endowment policies (who I know visit this site on an occasional basis), that "The Endowment Diary" has been brought to the attention of the members of the Treasury Select Committee; who reported last week on the endowment mis-selling scandal.

Their full report can be viewed here.

I see that the Channel 4 News website features a link to "The Endowment Diary".

This issue affects 6 million people; I don't think that the companies that sold us these underperforming "products" are going to be able to sweep the matter under the carpet, by paying small amounts of compensation to just a few people.

My thanks to Jane Perrone of The Guardian's Weblog for mentioning "The Endowment Diary".

She notes that it is "undoubtedly useful to fellow victims of mortgage mis-selling".