Double blow for endowment victims

CITY watchdogs must stop firms dipping into savings funds to compensate people who were mis-sold endowment mortgages, campaigners say. The Consumers' Association said shareholders should pay the multi-billion pound costs, not policyholders, many of whom are the victims of the scandal.

Up to 6m householders face a shortfall on endowment policies which were supposed to cover loans on their homes. Many were not warned about the level of risk when they took out the policies based on potentially volatile stock market investments.

So far, endowment mortgage holders have been paid about £330m in compensation for being sold the unsuitable products. But the money is routinely taken out of the long-term with-profits fund into which their premiums were paid or recouped via higher charges for customers.

The Financial Services Authority should ensure that compensation comes from cuts in dividends and profits, said the association. 'This industry is taking consumers for a ride,' said CA director, Sheila McKechnie, 'They expect these poor consumers to foot the bill for industry wrong-doing.'

In the worst cases, victims of the mis-selling could lose the roof over their heads. Many have been forced into making higher monthly payments to make up the shortfall on their mortgages.