HC Deb 02 February 1995 vol 253 c1211
11. Mr. Denham

To ask the Chancellor of the Exchequer what action he proposes to take to regulate the market for endowment mortgages.

Mr. Nelson

The sale of endowments is regulated under the Financial Services Act 1986. The new requirements for disclosure of charges and commission will help consumers decide whether endowment mortgages best suit their circumstances.

Mr. Denham

Is not it a fact that four out of five homebuyers in the 1980s chose endowment mortgages because they were told that their investments would not only pay off their mortgages but give them a large lump-sum payment? Does not the decline in the market now mean that many of those bonuses will disappear, and in some cases the investment will not even pay off people's mortgage? Is not that another example of the failure of regulation under the 1986 Act to protect people and their investments?

Mr. Nelson

No, it does not. Although it is true that far fewer people are entering into endowment mortgages than in the 1980s, they still remain an attractive and flexible means of mortgage repayment for many others. The Office of Fair Trading is currently examining repayment and endowment mortgages, and there has been significant tightening-up of the regulatory regime, to prevent mis-selling. Therein lies security for people for whom such mortgages are appropriate and who decide to enter into them.

Mr. John Greenway

Does my hon. Friend agree that house purchase and the associated endowment mortgage are both long-term investments, and that many people who entered into such mortgages have lived to rejoice the day that they did, because they have achieved substantially better returns than inflation and other investment vehicles?

Mr. Nelson

My hon. Friend is right. Endowment mortgages may continue to be the best means of repaying mortgage obligations for many people. It is true that the lapse rate of many such products has been high, particularly in early years. It is consummately to be hoped that the new commission disclosure regime and the greater protection that has been introduced will in future give greater reassurance and encouragement to prospective investors.