Looking for options on a mis-sold endowment mortgage

In 1991, I went to Irish Permanent for a mortgage of then £29,000 which is €35,802. I was a single mother, 26 years old, buying my first house. I had just started a job.

The only mortgage they would give me was the endowment. I have the original paperwork where the manager at the time put an an asterisk on the fact that I would have an option of surrendering the policy after 17 years as there would be enough in the policy to cover what was owed or continue paying for the 25 years and receive a lump sum at the end. Again this was highlighted by the manager. Nowhere in the policy, having read it from cover to cover, does it mention there is a risk involved.

It is due to finish on July 25th with a shortfall of €10,500 approx. I have paid it for 25 years without missing a payment. I moved house in 1999 but brought the policy with me as part of the new mortgage arrangement.

I have received letters over the years telling me that there was insufficient money in this policy to meet the €35,802 but as I could not and still can not increase my mortgage as my present repayments are €1,410 a month and I am still a single person with one income and still working at the same job. This repayment amounts to approx half of my take-home pay each month.

Do you have any advice for me? Should I engage a solicitor to fight this?

Ms DK, Dublin

You are in a bit of a bind. Strangely, I thought the endowment mortgage scandal had worked its way fully through the system but, on the basis of your letter, apparently not.

Even when you took out your endowment mortgage, the model had already been discredited in the UK, which was in full frenzy over the mis-selling of such products.

Ethics being what they are, none of that gave much pause for thought to Irish lenders who continued peddling this type of mortgage into the mid-1990s when Ireland belatedly woke up to the over-optimistic nature of the some of the guidance from brokers and the marked absence of health warnings for consumers.

Most Irish holders of endowments have long since filed the episode away as a bad experience. At that time, a 25-year loan would pretty much be the maximum permitted for most householders – this was before the housing bubble when such prosaic considerations as risk went entirely out the window for lenders – so yours must be one of a handful still in existence. This is especially so as many of those on endowments will have cut their losses and paid off their policies when they moved home and took out a new mortgage.

Your problem, clearly, is that you could not afford to cash in your policy – even to the extent that it was required to make up the numbers when you moved home, although I am surprised your current lender accommodated that given what was by then known about the weaknesses of endowments in delivering on their promises.

As you say, your various lenders have done well out of their loans to you and had you been given the correct advice at the time, your borrowings would have been well paid by now. Of course, the corollary is that, given your finances, you might not have been able to get a loan at all back then to buy a new home outside of the endowment bubble.

You have already taken some advice on this, although it has been of little consolation – just that both lenders will care little beyond getting back their money and will likely pursue you for it .

You have also been advised that there is little point going through the Financial Services Ombudsman on the issue. My understanding is that this is true. The ombudsman is time-barred by law from considering any complaints going back more than six years – a timeline that would certainly include your position.

However, there has been a legal case in recent years covering much of the same ground as your position. In Kilmartin versus Bank of Ireland, the Kilmartins argued in the Circuit Court that they had been mis-sold their endowment policy back in the same year you took out yours – 1991. They claimed the bank never told them of the potential risks or that there would be any risk at all.

The bank claimed that the cost of the mortgage over its lifetime was less than it would have been under a normal repayment mortgage and that, therefore they had not been ill-advised.

However, the court found in favour of the Kilmartins and awarded the couple damages of €16,000 – short of the €22,000 loss they claimed. That case took place back in 2010. At the time, Bank of Ireland said it would appeal but I gather that did not happen so the judgment stands as precedent.

Having said that, the legal route can be an expensive option and your lenders, knowing your financial position, may be betting that you won’t take on the potential cost.

And, of course, there is the fact that the lender has told you for some time that there will be a shortfall and you have effectively ignored that information. As a general rule, ignoring these things can only makes matters more difficult. Such deficits or debts tend not to “just go away” and you are now up against a very challenging deadline.

I think it might be worth your while at least talking about that Kilmartin case and its similarities to your position with a solicitor specialising in consumer law. It might even be worth your while considering a legal letter to the lender over the issue. However, I cannot really advise if, taking all your personal and financial circumstances into account, it makes sense to pursue a legal challenge in the longer term. Only you can make that call.

Please send your queries to Dominic Coyle, Q&A, The Irish Times, 24-28 Tara Street, Dublin 2, or email dcoyle@irish times.com. This column is a reader service and is not intended to replace professional advice