Halifax endowment misselling - Actual or Assumptions?

Hi,

I complained for endowment mis-selling from Halifax and they have upheld my complaint.

So that they can work out what to offer me, they have now asked me to decide whether I want to provide all details on past mortages etc (which I have to hand) or whether I want them to calculate the compensation based on their 'assumptions'

Can anyone give me advice as to what one I should choose?

Thanks

Sam.

Reply to
sambishop
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They can't expect you to play dice on this, so ask them to tell you what their assumptions are, so that you have something to go on.

Then let's take it from there.

Mind you, there probably won't be an awful lot in it.

Reply to
Ronald Raygun

Thanks for your reply.

Assumptions (as stated)

  1. Mortgage interest rate was Halifax Standard Rate
  2. Mortgage loan matched endowment policy amount (which it did)
  3. Mortgage started on same day as endowment policy (which it did)
  4. Mortgage has never been in arrears (which it hasn't)
  5. There has not been any part-payments (which there hasn't)
  6. Standard MIRAS has applied (?)

Looks like the only difference is the actual rate. For first 13 years of Mortgage it was at Halifax Standard Rate then dropped ever since to discounted rates.

Sam

Reply to
sambishop

Well, the compensation is calculated, I gather, on the basis of how big the shortfall of the endowment fund size at the date in question (which I think is the date of acceptance of the compensation offer, it certainly isn't the date of maturity if this is still in the future) is, relative to the amount you would have paid off the original mortgage debt had you had a repayment loan from the outset.

But I don't think the difference in monthly payments between the two methods is taken into account at this stage, and the endowment premiums vs decreasing term assurance. Someone else will be able to clarify, I'm sure.

The fact is that the higher the interest rate is, the more slowly you pay off capital, given the standard method of calculating loan repayments, so from this point of view it's better to go with actual than assumed, if the actual rate is going to be less than the assumed.

Take a 100k 25 year loan at 8%. After 12.5 years you would have reduced the debt to about 72.3k, i.e. would have paid off 27.7k. At 7%, though, the numbers would be 70k and 30k.

Of course in your case the lower rate would have applied only for a much smaller time portion than in this example, so the difference would be much less pronounced.

Another unknown is whether they then start to take into account how much you would have saved by switching to a lower interest rate. The idea is that, having switched to a lower rate on a repayment plan, you would have also switched to a lower rate on the interest only loan associated with the endowment plan. Dropping from 8% to 7% would save you a whole £1000 per year on an interest-only loan, but would save you only £724 per year if the full 300 months are still to run, and if you dropped after 12.5 years, the difference between an 8% and 7% repayment loan of 72.3k over the remaining 12.5 years is only £440 per year.

This would then reduce the margin which the "actual" method has over the "assumed", possibly even beyond zero, reversing the "which is better" result. So you need to know exactly what is going to be taken into account in the calculation.

Perhaps it would be better if they offered you the chance to submit your actuals, and were then to do the same calculation twice, once with their rates and once with yours, and just gave you whichever compensation works out more favourable to you.

Reply to
Ronald Raygun

In message , sambishop writes

My initial thoughts were that it would be a pain in the neck to provide details of the various mortgages you might have had, in order to take the "actual" deal.

However, as your mortgage has always been with the Halifax, (thats how it looks from here, anyway), why not accept the deal which matches your situation, and leave it to them to work out your rates - you may need to explain this to them.

Then, when you have an answer, I'm sure Ronald will look at their offer to make sure they have calculated correctly.

Reply to
Richard Faulkner

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