Friday, November 5, 2010

UK Mortgage Default : May Be the Right Time to Sell Your Endowment

Avoiding Mortgage Default by Selling Endowments

The IMF just issued a warning about all economies globally. Only one country received a lower vote of confidence than the UK, and that was Italy. Although some countries such as Canada have strong commodity prices that support a more optimistic view for them, commodity prices have fallen sharply. The Canadian dollar for instance on October 10th, 2008 dropped to its lowest level in many years against the US dollar. The IMF then will likely issue many adjustments to its impression of global economies. Overall, however, it doesn't look good.

The UK banking system was hit very hard by events in the US banking industry, particularly the sub prime mortgages. Some banks were over exposed to mortgage debt and when the credit crunch hit, some were facing bankruptcy. Several mergers and acquisitions have taken place, and the end may not be near as far as bank failures are concerned. With unemployment rising, many homeowners will find paying their mortgages in the short term quite a task.

Those with large investment portfolios similarly are seeing the value of their securities falling to frightening lows. On October 7th, the UK stock market suffered its worst loss in its history. The FTSE-100 index of Britain's biggest companies dropped over 391 points to end the day down 7.9 per cent.With credit tightening worldwide, the number of business casualties will only climb and the depths to which the UK stock market hasn't quite been plumbed yet.

The UK Credit Crisis

The tightening of credit may mean only the very best qualified borrowers will be able to access a mortgage. While in London, New York USA mayor Mike Bloomberg said the looming crisis "is going to affect anyone who wants to borrow money to buy a car or a house or to expand their business or take out a student loan."

To make things worse, the UK inflation rate has hit an astounding 5.2% according to the Consumer Prices Index, the Government's preferred measure of inflation. This adds up to a situation where consumers may not be able to pay their mortgages. Those without funds to fall back on, may end up seeing their homes repossessed by lenders.

Time to Sell Your Endowment?

Mortgage endowments were a very popular financial instrument sold in the 1980's that offered life insurance and investment return. Mortgagees would be able to pay off their mortgages when they came due and still have a little more left over. Unfortunately, the highly inflationary 80's had very interest rates, which fell through the 90's and into this century. Many endowment policy holders discovered they would not pay out what they needed to pay their mortgage coming due after 25 years.

These endowment policies can be sold on the secondary market or sold to the issuing financial company. Many policyholders were hanging onto their policies hoping interest rates would rise and they would grow in value, thus covering the mortgage coming due. Unfortunately, interest rates didn't rise. Recently Uk interest rates have risen, but it's too little too late for the majority of policies sold.

Those with endowment policies might consider selling them to endowment brokers. These brokers have access to a broad range of investors who value them as solid investments. It's a great opportunity for endowment holders who would otherwise be stuck with a policy that wouldn't provide enough to pay the mortgage. Although interest rates are rising, it is unlikely banks will be paying out a great deal on securities and policies. They're in a struggle to survive and will not be generous in the next year.

If you sell your endowment to the issuing financial firm, you may be surprised at what they're offering to redeem it. Some people are shocked at how little they offer. The only other option is to sell it on the open market. By selling it to endowment brokers, prices of 10% to 35% more than redemption prices have been achieved. On a larger policy, that can amount to ten thousand pounds or more.

If you're a homeowner facing mortgage foreclosure and repossession of your home, it might be a wise move to sell your endowment to protect your investment. That gives you time to recover later and perhaps get a second mortgage to help you manage your financial debt. If you've ever thought of selling your home and moving to another country, or moving to Scotland, now may be the right time to make that move. The key to happiness and financial success really is survival. Hopefully, you'll survive this UK recession well.

With the UK economy expected to worsen, Selling Endowment Policies may be the best financial decision for those facing home repossession. Tens of thousands of endowment policies are outstanding and can be sold on the secondary market. If you think selling endowments be a good option, visit to learn more about the advantages. On their web site, you'll be able to call direct or receive an online price quote for your endowment. Just fill out the details of your policy and you'll receive a quote fairly soon. These will be tough times ahead in the UK yet the economy is expected to improve after a few years.


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