During the 1970s and 1980s, home ownership and the mortgage market grew rapidly. Behind this expansion lay a number of factors, including strong economic growth, deregulation of the financial markets, favourable treatment of home ownership by the government, the sale of council houses and house price inflation.

Many of these factors provided one off boosts to the market, which have since dissipated. With a recent history of steady economic growth, low inflation, uncertainty in the labour market and declining assistance for homeowners, the direction of the market is unclear.

It is MAPS belief that positive factors such as the current low levels of house prices in relation to earnings, relatively low mortgage rates and falling unemployment will dominate the market. These will outweigh any negative factors such as borrowers confusion about government policy in relation to owner occupation and uncertainty about the direction of house prices and negative equity.

We therefore expect the housing market, and consequently the mortgage market, to grow quite strongly through to the end of the century. Despite this growth, however, MAPS does not believe the future of the endowment mortgage looks so prosperous.

Whilst around 57 percent of new mortgages are on an endowment basis compared to 26 percent on a repayment basis, the exclusive MAPS research indicates a less rosy future for the endowment mortgage. Only just over a third of respondents (34 percent) said they would seriously consider taking an endowment mortgage in the future, whilst 40 percent said they were more likely to take a repayment mortgage than an endowment.

With sliding investment returns from equity markets in the early part of the decade, bonuses on endowment policies have fallen in recent years. The publicity this has generated has resulted in a number of 'scare' stories about insufficient funds being available to repay a mortgage when the endowment policy matures.

With the majority of the endowment maturity value made up of terminal bonus and with the terminal bonus so dependent on investment conditions around the time of maturity, the potential pitfalls of the product are very apparent.

Whilst average maturity values have fallen in recent years, longer term policies have so far proved more resilient and it remains unlikely, though a possibility, that sufficient funds would not be generated from a 25 year policy to repay a mortgage.

Research for the Office of Fair Trading (OFT) estimated that 30 percent of mortgage endowments are surrendered or lapsed within the first five years and less than 20 percent of endowments run to maturity.

At the heart of the problem is education, both in terms of how the policy works and how the salesman is remunerated. If the public remain cautious of endowment policies due to sliding investment returns from equity markets, then why the sudden appeal of PEP mortgages which are subject to similar market fluctuations?

The answer is revealed in the MAPS research, which shows that 60 percent of respondents agree that endowments tend to get recommended by commission hungry salesmen and over half the sample says they have heard or read bad things about endowments.

If consumers knew that a salesman earned the same commission whether he sold an endowment mortgage, a PEP mortgage or a repayment mortgage, then they would be far more likely to heed the advice when an endowment mortgage was recommended.

Alongside this, the research also reveals the degree to which the public remain poorly informed on the nature of the product. With under half of the sample saying they are confident in understanding the workings of an endowment mortgage, there is much that can be done to raise the public's knowledge. The payoff to the insurance industry could be significant since people are far more likely to purchase a product they understand than one they do not.

Building society conversions are also loosening the ties of loyalty that had developed from mutual ownership. As financial institutions offer people substantial incentives to move their mortgage accounts, so market conditions become ever more explosive. Such market conditions are resulting in the demand for services being less stable and a dwindling in the supply of reliable long term customers.

In 1944 there were 905 building societies, a figure which had declined to 117 by 1990, There are currently less than 80 and since 1990 over 4,000 bank and building society branches have closed as institutions have merged and adapted to technology altering the way they interact with their customers.

Personal financial markets are still characterised by an excess provision of products and services relative to demand and the trend towards institutions merging to eliminate unnecessary duplication is firmly established.

The majority of mortgages outstanding will by the end of 1997 be in the hands of Public Limited Companies (PLC) and the top nine or ten institutions account for over 70 percent of mortgages outstanding in the UK.

The reality of building societies becoming PLCs, however is that they are now forced to consider shareholder value and return on capital - very different considerations than in the old mutual days. Such priorities will result in them being unable to compete with 'cut-throat' mortgage offers and will see them continuing to diversify into other financial markets.

As the trend to demutualisation continues in the building society sector and spreads to the insurance industry, MAPS expect the mortgage market to become increasingly concentrated in the hands of a small number of large institutions with a number of niche players operating on the periphery.

Whilst fears of endowment policies generating insufficient cash to settle the mortgage may have been overdone, the jolt they have given to public confidence is not in doubt. Though this has seen a movement towards other mortgage repayment vehicles, such as PEPS, it is MAPS belief that the repayment mortgage will be the long term beneficiary of the endowment's weakness.

The rewards of a PEP mortgage can be great if the stock market performs well and the endowment policy can produce a bumper payout if maturing in suitably healthy investment conditions. However, the attractions of a 'quiet life' and the certainty of repayment in an increasingly uncertain world will result in the repayment mortgage recovering its position as first choice for the majority of house buyers.