More than 70,000 homebuyers can this year expect a shortfall on endowment mortgages with one of Britain’s biggest insurers.
Aviva, which looks after £50 billion for some 1.8 million customers in its with profits fund, has cut some bonuses paid on its funds.
The payouts for those with policies with the old General Accident and Norwich Union — both part of Aviva — coming to the end of their term this year are down on similar deals which matured last year.
A 25-year policy invested in the CGNU (General Accident) fund produced £31,950, down 5.9 per cent on last year’s £33,937.
Policies linked to the Norwich Union fund will pay out £23,465, down 7.4 per cent on the £25,353 last year.
The figures are based on a 25-year endowment taken out by a 29-year-old man paying in £50 a month.
More... Mortgage tricks: How to keep your ultra-low tracker AND protect yourself from rate rises Is the mortgage market heating up? Post Office slashes fixed rates by as much as 1%Endowment mortgages were designed to help homebuyers pay off their mortgage.
Borrowers made interest-only payments on their mortgage and saved extra in to an endowment plan with an insurance company. This savings pot was supposed to grow sufficiently to repay the capital to the lender at the end of the mortgage term, typically 25 years.
More... Mortgage tricks: How to keep your ultra-low tracker AND protect yourself from rate rises Is the mortgage market heating up? Post Office slashes fixed rates by as much as 1%When policyholders signed up for these savings plans, savers were told they could get £85,000. In their heyday in the early Nineties, pay-outs topped £100,000.
Aviva has 71,000 endowment policies maturing this year, and estimates some 70,290 will fail to pay out enough to cover the policyholders’ home loan.