When it comes to repaying your mortgage, you have two options. You can choose an interest-only loan, which means that each month you pay the interest to the lender and also put money into an investment, e.g. an endowment, that will repay the debt at the end of the term, usually 15-25 years.

Alternatively, you can opt for a repayment mortgage. Sometimes known as a capital and interest loan, this is where you pay off the interest and a portion of the capital debt each month. You are not relying on an investment plan to grow to sufficient size to clear the mortgage all in one go at the end of the mortgage.

In the house-ownership boom that followed the second world war, most buyers took the traditional repayment mortgage route. In the 1970s insurance companies began to promote endowment policies as a good way to settle an interest-only debt. By the mid 1980s about 80% of all mortgages were backed by an endowment.

Endowments became popular because insurance companies managed to achieve impressive investment returns. Thus, for roughly the same amount as the cost of capital and interest loan, you could take an endowment mortgage that would not only clear the debt but also could possibly produce a cash surplus.

Other options were promoted as alternatives to endowments. Among these were pension linked mortgages and investment portfolios made up of a series of annual personal equity plans (Peps), which would now be replaced by individual savings accounts (Isas).

Recently, the balance has began to swing back to repayment mortgages. One of the main reasons for this has been a trimming back of expectations with regard to the investment potential of endowment plans. Insurance companies no longer routinely achieve the double digit returns of past years, which means the maturity values are not as impressive as they once were. In some cases, policyholders have been required to save extra amounts to ensure that their endowment remains on course to pay off their mortgage.

An increasing number of insurance companies have stopped recommending endowments as suitable products to back an interest-only mortgage. This list includes big names such as Prudential, Halifax, Norwich Union and Nationwide. In addition to fears over investment performance, endowments are not very flexible, which can cause problems if you move house or get divorced. Many people are reviewing their endowment policies and considering whether to switch to a simple repayment mortgage.