Reuters report that complaints about endowment policies will hit 2004 profits at Countrywide Assured's life assurance unit. This unit will be demerged, and will start trading as Chesnara on the 25th of May.

The firm is expected to take a £4.8M provision to cover against complaints for endowment policy mis-selling.

Countrywide Assured note that "..the increased level of endowment complaints experienced during January and February 2004 has persisted...".

Welcome to the Wild West

I received an interesting letter today, from the complaints company handling my claim for compensation the mis-selling of my pre 1988 endowment mortgage.

It seems that in the last few days another company has been writing to some of their clients. This “interloper” claims that the complaint cases have been transferred to them.

In other words, the “interloper” is trying to poach the business of the company that is meant to be handling the endowment complaint.

My complaints company points out that it has not transferred any cases to another company, and has not agreed that this company may contact its clients.

Their letter then goes on to ask me if I have been contacted, and to forward any details that I may have, I have not.

I rang to ask them how it was that this “interloper” had managed to get hold of their clients’ details. I was told that they do not yet know, they are conducting an investigation to find out.

This rather sad, and disturbing, tale shows how unpleasant and poorly regulated the whole endowment industry has become. In my view it is more akin to the Wild West, rather than a well regulated financial system in the 21st century.

Not only are 6 million endowment policy holders facing an expected £40BN shortfall on their mis-sold policies, they are now subject to dirty tricks by unscrupulous sharks seeking to bleed them dry of even more of their hard pressed funds.

In my view, the FSA and insurance companies need to get their act together and sort this disgraceful situation out once and for all.

Citizens' Advice are warning that the UK faces a debt crisis, which threatens to ruin the lives of many.

Their research shows personal debt problems threaten to overwhelm large numbers of people; this was the message at a debt conference organised by the Conservatives.

Citizens Advice has seen a 44% increase in debt problems in the past six years, and its 2,800 offices deal with over one million new debt enquiries a year.

The expected £40BN shortfall on mis-sold endowment polices will hardly help this situation.

Citywire report that house prices are continuing to rise. The gap between north and south is narrowing.

The Halifax notes that house price inflation in London has fallen from 19% in the first quarter of 2003 to 9% for the same period this year, and from 26% to 7% in the South East on the same basis.

House prices continue to rise most rapidly in northern England and Wales. The biggest price increases over the last year have been in the north (36%), Wales(36%), the North West (30%) and Yorkshire and the Humber (28%).

Rightmove, the property website, expects house price inflation to hit 20% this year.

Rightmove note that the price of an average home was £184,582 in early April, £13,674 more than in January; and 50% more than at the start of 2002. Prices rose 2.8% in March, taking annual price inflation to 14.4% from 11.9% in February.

They are hopeful that there will not be a crash, some good news for endowment policy holders then!

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%.