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Nine out of ten mortgage endowments held by customers of insurer Norwich Union are likely to see their policy fail to pay off their mortgage.

Endowment mortgages are used in conjunction with interest-only mortgages, allowing the customer to pay premiums to the endowment policy as well as interest on the mortgage.

Most of the premium is invested, some pays for life insurance and some covers charges of the provider. Usually the matured policy would, thanks to a strong stock market performance, ensure a cash surplus but recent poor market performances have brought such a result into doubt.

Norwich Union's latest with-profit results reveal an impending shortfall for 89.5 per cent for its mortgage endowment policyholders, who have been placed in the 'red' category.

This means their policies are unlikely to gain sufficient returns to pay off their mortgage, forcing most to act within three years to protect themselves from losing out.

Problems for low-cost endowments began to emerge at the beginning of the decade, when falling stock markets undermined the ability of insurers to provide customers with cash surpluses on their investments.

Norwich Union insisted that its top-up bonuses from its investment funds would help the situation, however.

"Returns from the stock market and commercial property continued to be strong in 2006 and as a result most final bonus rates have increased significantly with all policies increasing in value in 2006," Crawford Davidson, marketing director at Norwich Union, said.