People taking out new endowments should seek advice according to the chairman of a working party investigating the mortgages.
John Jenkins issued the warning after the Institute of Actuaries working party on endowment mortgages found three quarters of new endowments have charges which are too high and that the products are no longer suitable for many people, especially those in debt and those who want a safe option.
Repayment mortgages are recommended as better value long term in most cases.
The party also concluded that if endowments are to survive they will have to keep charges down and drop the front end loaded redemption position which sees customers penalised if they cash in the loan early.
Jenkins also says existing endowments need reviewing and slammed 10 and 15 year endowment mortgages as bad value.
The actuaries express the level of charges – bid/offer spread, fund and plan charges – as a "reduction in yield". The maximum RIY they see as acceptable is 1.3 per cent per annum – but the industry average is 1.4. Only a quarter of 25 year endowments are under the maximum.
Equitable Life was praised for having a RIY of only 0.4 per cent on 25 year products while Guardian was singled out for its limit-busting 2.5 per cent.
Most life companies are at least adopting its suggested "prudent" growth assumption of 6 per cent when calculating premiums .
Jenkins says: "Repayment mortgages are more straightforward and lower risk. People have to be happy in their mind why they are taking an endowment out, and they should shop around."
ABI spokeswoman Suzanne Moore says: "Endowments may actually perform better than this theory suggests, but they are inflexible in the longer term so fewer people are taking them out."