An article in the Telegraph warns that a new mortgage crisis could be looming, as half of endowment compensation paid out has been ’squandered’ rather than being used to restructure the mortgage.

Of the nearly £2.5bn paid out in compensation since the endowment saga began, mortgage lenders say only half has been used to protect against a shortfall by reducing their mortgage balance or helping fund a remortgage, with the rest being frittered away on holidays, cars, and other lifestyle purchases.

With the first significant number of endowment mortgages starting to mature in 2012, 25 years after the property boom of the 1980s, building societies and other mortgage providers say that many people may face shortfalls and have difficulty repaying their mortgage despite having already been compensated.

Representatives of the mortgage industry say that the situation could be improved in the future by having all compensation payments automatically used to reduce the mortgage balance rather than being paid to the mortgage holder.

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