Although pension mortgages were marketed as a tax-efficient way to repay your mortgage, a large number of these mortgages were potentially mis-sold to thousands of people, especially in the 1980s and 1990s. The potential high risk of these mortgages meant they were really only suitable for a small amount of homeowners.
Those who took out pension mortgages, which combine an interest-only mortgage loan and a personal pension, with the borrower paying only the interest on the outstanding mortgage, are now facing a massive shortfall in the cash available from their personal pension to repay their mortgage. This is due to the poor investment performance of personal pension schemes over the last few years, which is well below expectation. With the value of pensions dropping, there is great concern about financial security of thousands of homeowners with insufficient money to repay their mortgage and a pension that is much lower than they expected.
Although these mortgages were sold to people as the best way of repaying a mortgage and building up a good pension for retirement, homeowners may not realise the extent of the problem until they come to retirement age, as there has not been as much media coverage of the problems of pension mortgages as there has been about endowment mortgages.
On the plus side, as with endowment mortgages, if you can shown that the pension mortgage you were sold was inappropriate to your circumstances, then you could be entitled to claim compensation .
Mis-sold Mortgage Claims > Mortgage News
Shortfall on pension mortgages reported
Wed, 09 Jun 2010
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