Filling the endowment gap

Equity-release providers have been urged to offer products to fill shortfalls on endowment policies held by thousands of homeowners.

Though products would likely be limited to those of a set age, using equity in policyholders&#39 homes could be one way to overcome disappointments when policies mature below target.

Mark Goodale, general manager of equity release specialist Ecclesiastical Financial, says: “The norm at the moment is for people to have substantial equity in their house but, essentially, all equity-release providers will insist on a first charge. If that hasn&#39t been cleared by the endowment it will need to be cleared by another source. It would be great if your endowment office is also an equity release provider but not many are.”

John Stewart, director of PMI Independent Financial Adviser, also sees an opportunity. He says: “With so many people potentially needing money to meet shortfalls it could be a huge market and there&#39s definitely scope for equity release for people who have shortfalls. However, if they have got another income they should stick with the straightforward repayment option whenever possible.”

Bernard Clarke, CML spokesman, says: “This could be an option but it is not something we have looking at greatly. Borrowers would have to consider this carefully.”