Joan Burton (Dublin West, Labour)
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Question 280: To ask the Minister for Finance the rights of people with endowment mortgages who may face a shortfall on the amount of money promised at the outset by the originating institution; and if he will make a statement on the matter. [33499/09]

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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As the Deputy will be aware, an endowment mortgage is a mortgage where only the interest is paid to the lender during the life of the loan. Simultaneously, payments are made into a life insurance policy which is designed to cover the cost of repaying the principal loan amount by the end of the loan term. The majority of these policies are investment based and as a result they are exposed to risks that may deliver positive, negative or neutral returns over any given period. This element of risk makes it impossible to state with certainty what the final value of the policy will be at maturity. Forecasting future values means that assumptions of future returns are made.

The popularity of endowment mortgages was at the highest during the late 1980s and early 1990s. At the time, there were a number of advantages associated with these products, such as the availability of mortgage interest relief and tax relief. Another perceived advantage was the possibility that a surplus sum could accrue to the customer at the end of the loan term.

While a voluntary code did exist in Ireland in relation to the sale of endowment mortgages, there was no comprehensive statutory code in place in Ireland covering the sale of these products at the time they were sold. When the risks associated with the product were highlighted in Ireland in the 1990s, specific provisions were incorporated into the Consumer Credit Act, 1995 which requires warnings to the effect that the proceeds of a policy may not be sufficient to repay a mortgage. Endowment mortgage savings plans must, under the provisions of the Consumer Credit Act 1995, be reviewed by the life company at least every five years to check if the plan is on track to repay the mortgage and the consumer has to be sent a statement on this at the five yearly intervals.

The sale of endowment mortgages is now covered by the provisions of the Financial Regulator's Consumer Protection Code, particularly in terms of knowing the consumer and the suitability of the recommended product. Borrowers that are of the opinion that they been mis-sold endowment mortgages, should, in the first instance make a formal complaint to their provider. If, having exercised the provider's formal complaints process, the consumer is still not satisfied, he or she can refer the matter to the Financial Services Ombudsman for consideration in accordance with his statutory remit.