As the recent market turmoil continues, the BBC’s “Working Lunch” highlights the potential implications for millions of home owners, many of which will face a projected shortfall in their endowment mortgage. The dilemma for policy holders is whether they should continue to throw good money after bad and carry on with monthly payments into their endowments, or whether they should consider other options such as surrendering or selling their policy.
The predicament of Duncan and Sylvie Say is presented by the BBC as an example of just how serious the problem can become. They are paying nearly £800 a year into their endowment policy, but last year the value of the plan fell by more than £2,000, leaving an estimated £15,000 shortfall in their mortgage repayment.
Surrenda-link data suggests that this is not an isolated example. Analysis of its clients’ portfolios shows average policy values have fallen by around 12% over the year to May 2009 (*). This indicates that Duncan and Sylvie Say’s experience is one that will be sadly shared by many other policy holders nationwide.
The secondary market for buying endowments has slowed considerably over the past year, further reducing the options available to policy holders looking to dispose of their endowment. This slowing has been caused by continued investor uncertainty in the capital markets, and the potential impact on endowment values. Jeremy Brettell, at Surrenda-link is quoted as saying, "TEP Funds are holding fire because the policies they have already bought have gone down in value". Although, Mr Brettell’s view is that demand could improve soon.
Policy holders looking to sell their with-profit endowment should always consider seeking a market appraisal for their policy before surrendering. Surrenda-link can provide a free no obligation valuation of your policy. Simply fill in our on-line enquiry form, or call us on 0800 919 021.
*based on Surrenda-link analysis of surrender value movements, net of premiums, from 31st May 2008 to 31st May 2009.