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&#39Only one fund on target to repay mortgage&#39

Just one of the 276 funds most likely to have been chosen for a Pep or Isa mortgage five years ago is on course to repay the loan, says Hargreaves Lansdown.

Analysing the performance of funds in the UK all companies and UK equity income sectors – the two most popular with homeowners – HL has found there are just six with a current value in excess of the likely sums invested.

Only one – Rathbone&#39s special situations fund – is on target to pay off a £67,000 loan, assuming a 25-year 95 per cent mortgage was taken out in April 1998 to buy a property worth £72,000, which was the average house price that year.

However, even on this fund, if the loan was taken out assuming 7 or 8 per cent growth, as opposed to 6 per cent, borrowers would need to increase their monthly payments to ensure capital is repaid.

Every other fund requires investors to increase their payments, no matter what the projected growth rate. HL says the results are particularly alarming as few investors would have chosen any of the six funds.

Investment manager Ben Yearsley says: “A large percentage of investors would have bought even more poorly performing funds. They need to look at what they have and take corrective action immediately.”

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