Endowment  Mortgage 

A decade ago three-quarters of new mortgages were endowments, but now these come with a health warning, and have fallen out of favour because of what is seen as an unacceptably high level of risk. With an endowment mortgage you only pay off the interest each month, and then make a second payment into the endowment - an investment that at the end of the life of the mortgage should have grown enough to pay off the debt.


If the endowment has grown larger than the sum you ye borrowed, there could be a bonus at the end of the mortgage. But if the endowment does not grow to meet the amount you've borrowed, you could end up still owing money after 25 years of payments.


Disputes over how these were sold and whether people were made aware of the potential risks are likely to rumble on for years. And the suspicions raised about endowments are likely to cast a cloud over other types of stock market  related mortgages.


The rise and fall of endowments is also a useful warning that economic climates can change and you should not make any assumptions about interest rates and the housing market. Endowments became popular in the years when stock markets appeared to be on a relentless increase and when house prices seemed set to climb forever. But after a protracted house price depression and then faltering UK markets, the endowment bandwagon now looks rather ragged.