Endowment mortgage complaints 'cost ?24m

The handling of a record number of complaints about endowment mortgages cost the Financial Ombudsman Service (FOS) around ?24m this year, it emerged today.

The Ombudsman expects to have investigated around 100,000 complaints during the year to the end of March, around 50,000 of which relate to endowment mortgages. In addition it received around half a million inquiries on how to make a complaint, around half of which also related to endowments.

It is estimated that the FOS had to spend around 60% of its ?40m budget for the year responding to complaints about endowments or investigating them. It currently has 10 of its 23 ombudsmen working on endowment mortgage cases, and they are upholding around 40% of complaints.

In addition, insurers have so far paid out or set aside ?873m in compensation for policyholders over mis-selling endowments or other problems relating to the policies. FOS spokesman David Cresswell said he thought the level of complaints about endowment mortgages had reached a record high during the year.

"We had expected mortgage endowment complaints to start trailing off by now, and that had been a prediction for next year," he said. "But now we don't think that's likely. Instead we think we will see them plateau."

He attributed the high number of complaints to increased publicity for the products, particularly due to a recent investigation by the Treasury select committee and to time limits which forced many people to act now.

The FOS is funded through a levy on the financial services industry based partly on the size of a firm and partly on how many complaints the FOS receives about it.

Consumers collectively face a shortfall of nearly ?40bn between the maturity value of their policies and the mortgages they have to pay off, according to estimates in the recent report by the Treasury select committee.

Around 80% of the 8.5m endowment policies still in force are unlikely to pay off the mortgages for which they were taken out, with average shortfalls of ?5,500.