Two thirds of current endowment mortgage sellers not up to scratch reveals government watchdog.

The government's money watchdog has revealed to Panorama that it can be only be confident that a third of the firms currently selling endowment mortgages are giving the right advice, which is a poor picture.

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In only about a third of the cases could we be confident that the right advice has been given. We've made it clear that firms have got to get their act together through this year, said Michael Folger who is the FSA's director of investment business. He said the FSA will be repeating a secret check operation this year.

Advice from mortgage brokers about what product is best for customers remains unregulated by government and covered only by an industry code. Secretly filmed evidence by Panorama shows this is being flouted. The programme's evidence reveals a broker, tied to Allied Dunbar, pushing endowment polices and downplaying repayment policies, advice which clearly breaks the code.

Programme Correction: Click here

You get the impression that the Government for some reason is frightened of the industry. I can imagine a scenario where in 5 or 6 years time we'll be sitting having a similar conversation about things that are happening now that won't explode until later on down the line. I think this is the opportunity that has been missed. Iain MacQueen-Sims

Iain MacQueen-Sims, a mortgage auditor, who sat on the FSA's advisory panel tells Panorama the advice should have been regulated: "You get the impression that the Government for some reason is frightened of the industry. I can imagine a scenario where in 5 or 6 years time we'll be sitting having a similar conversation about things that are happening now that won't explode until later on down the line. I think this is the opportunity that has been missed".

Panorama also reveals that 3 million out of 5 million households with endowment mortgages are receiving letters telling them they may have a shortfall in paying off their mortgage according to FSA figures. The programme tracks down some of the salesmen who pushed endowments in the late 1980's and discovers that many are now still working in the industry as Independent Financial Advisors.

The Whites

Trevor and Alison White were sold a GAN policy in 1990 by a salesman who encouraged them to cash in their existing policies to buy his. They now discover that when their mortgage is due to be repaid this October they will be £6,500 short .

He was smart, he was covered in gold, he had big gold rings. Trev and I were totally sucked in . Trev and I are just working class people. says Mrs White. The salesman, Sandy Forrest, is now an Independent Mortgage Broker on London's Regent street. He denies mis-selling the White's policy but Windsor Life, who took over Gan, has offered the family compensation.

Julian Yolland

A former Gan salesman, Julian Yolland, tells the programme he feels guilty at the way the endowments were sold the 80's, when he was earning £20, 000 a month in commission. Mr Yolland, who is now also an Independent Financial Advisor tells the programme he got out of Gan because I wanted to be able to sleep at night.

The Ashworths

The programme also reveals the anxiety of families trying to decide how to tackle their predicted shortfalls. Howard and Tracey Ashworth, of London were told a year ago by Eagle Star insurance that they were heading for a shortfall and would have to increase their monthly payments from £105 to £139 a month to get back on course. Exactly a year later the company has told them they are still facing a shortfall and should increase payments to £177 a month.

The whole thing stinks. Somebody is making a lot of money and it is not us, Mr Ashworth says.

Eagle Star didn't comment on the Ashworth's case but said it regretted the concern that mortgage endowment policy reviews were causing.

Related links:

The Financial Services Authority

The Council of Mortage Lenders

The Association of British Insurers

Compensation from Life Assurance Industry Mediation Services factsheet