The repayment of mortgages by endowment assurances Available to Purchase

Looks at the problem of endowment assurances that do not meet their targets to repay residential mortgages. By analysing the present value of payments under different inflation and interest‐rate regimes, we conclude that the perceived problems with endowment policies may simply be a manifestation of “money illusion”. Nevertheless, there could be frictional problems and other problems arising from the use of endowment assurances to repay mortgages which we identify but do not analyse in detail. The failure of such a major method of repaying mortgages to perform in line with expectations will have implications for the residential housing market.