THE cost of claims related to the mis-selling of endowment mortgages has doubled to more than £2bn in little over a year, the City watchdog said yesterday.
The Financial Services Authority said banks and insurance companies have now paid out £2.2bn in compensation - twice the £1.1bn it said had been paid by the end of 2004.
The massive increase came as the number of homeowners complaining they were mis-sold endowments soared last year.
Endowment mortgages, which were popular in the 1980s and early 1990s, gave buyers interest-only mortgages backed by investment plans to cover the cost of the house. But many of the investment plans failed to deliver, which has led to complaints from homeowners left short of funds.
The FSA said that up to March 31, 2003, there were 250,000 complaints resulting in £225m of payouts.
In the following year alone there were 202,200 complaints and payments hit £424m, while a year later the figures rose to £601m of compensation and 324,935 complaints.
The numbers spiralled again last year - in the 12 months to April 1, 2006 - when there were 767,152 complaints leading to compensation payments of £945m.