How endowment shortfalls develop

This content applies to Scotland only.

Housing laws vary between Scotland and England. This page applies to Scotland only. Get advice relating to England

An 'endowment mortgage' is not actually a mortgage at all, it's a combination of an interest-only mortgage and an endowment policy, an investment which is designed to produce enough money to pay off the capital sum of the mortgage.

Many endowment policies that were taken out when interest rates were high (for example, between 10% and 12%) were issued on the assumption that it was reasonable to expect them to earn between 7% and 9% each year. However, when interest rates fell, millions of people were left with a policy that would not produce a large enough lump sum to pay off their mortgage.

If you have an endowment policy that won't cover your mortgage, you should have received several letters from your lender. If you haven't, get in touch with your lender, to make sure there isn't a problem. If you do have an endowment shortfall, there are two things you need to think about:

• How can you make up the shortfall so you can pay your mortgage off?
• Can you complain to the company who sold you the policy and get compensation? Bear in mind you can only complain about the way the policy was sold to you, not the performance of the policy itself.