Within the First National / Irish Life Mortgage Quotations, the meaning of the term ‘% per annum’ with respect to the assumed growth rate used for the First National Home-way Endowment Mortgage Fund was at variance with the meaning of the term ‘% per annum’ with respect to the interest rate charged by First National on the Mortgage Loan.

The meaning of the term ‘% per annum’, in the context of the assumed growth rate of 10.75% per annum for the Endowment Mortgage Fund, was the Annual Percentage Rate (APR). This was not the case in the context of the interest rate of 11.85% per annum as applied to the Mortgage Loan itself. The actual Annual Percentage Rate (APR) being charged by First National on their Mortgage Loan was 12.749%.

In other words: IF the meaning of the term ‘% per annum’ in the context of the assumed growth rate was equivalently applied to the interest rate quoted for the Mortgage Loan, THEN the interest rate quoted should have been 12.749% per annum, and not 11.85% per annum.

Note! You will have a clearer understanding of the significance of the APR to an informed decision by the borrower/investor when you study later chapters (particularly Chapter 6: The Cost of Credit). For the present, it is sufficient to understand that compounding a Mortgage Interest Rate on an annual basis while charging repayments on a monthly basis is more expensive for the borrower than compounding the same Mortgage Interest Rate on a monthly basis while charging repayments on a monthly basis.

The term ‘% per annum’ therefore has TWO DIFFERENT MEANINGS within the text of ONE DOCUMENT (the First National Home - Way Mortgage Plan Quotation).

Neither the Existence of Bonus Units, nor the ABSOLUTE NECESSICITY of the inclusion of Bonus Units over the last 5 years of the Endowment Policy Term in order to achieve the Projected Surplus and Loan Repayment, had ever been mentioned in any First National presentation literature or in any of the PRE–CONTRACT Representations made to me by First National / Irish Life, either those articulated by the First National advisor or those detailed in the First National / Irish Life Quotations.

Nor was it ever mentioned, in the case of the 15 Year Endowment Mortgage actually chosen by my wife and I (see Appendix 1/3), that the Early Repayment Term of 13 years and 8 months was also dependent on the ABSOLUTE NECESSITY of the inclusion of Bonus Units over the first 3 years and 8 months of the last 5 years of the Endowment Policy Term.

Nor was it ever mentioned, in the case of the 20 Year Endowment Mortgage Quotation (i.e. Case 1 of Appendix 1/2) represented to me by First National at our pre-contract meeting, that the Early Repayment Term of 18 years was dependent on the ABSOLUTE NECESSITY of the inclusion of Bonus Units over the first 3 of the last 5 years of the Endowment Policy Term.

Again, because both First National and Irish Life did not bring these facts to our attention, they effected concealment of a Major Defect of the Endowment Mortgage Contract. It is only in the latter stage of the Endowment Mortgage Contract (IF the assumed growth rate is achieved) that the Endowment Mortgage Fund Value will begin to equate to the Repayment Mortgage Loan Principal Repaid Value, for equivalent net cash outflows. This has potentially harmful consequences for the Borrower. (This highly significant fact will be explained in detail in Chapter 10.)

But, once again, the greater ‘Sleight of Hand’ is that, by omitting to bring the consumer’s attention to a major defect (the necessary DEPENDENCE ON Bonus to achieve the Projected Surplus and Loan Repayment) of their Endowment Mortgage Contract, First National / Irish Life have effected concealment of a Major Attribute of the Repayment Mortgage Contract, in that, with the Repayment Mortgage Contract, NO SUCH DEPENDENCE EXISTS.

The month by month Investment / Fund Value breakdown (see Appendix 4/2) provided by Irish Life also showed that, subsequent to the Down-Valuing of Premium Payments by Irish Life’s ‘creaming off’ process, even further charges were imposed on the policyholder. Units were deducted (surrendered) ‘for stamp duty (year 1 only), life cover and policy fee'.

Irish Life’s post contract June 1993 letter (see Appendix 1/7) had stated that ‘At the start of every month the cost of life cover for that month is calculated and a number of units are surrendered from your policy to meet that cost along with a policy fee of £2.00 per month.’

Note! This June 1993  letter had also indicated that the 100% ‘cream off ’ in the first year included stamp duty. Note B at the end of the Investment / Fund Value breakdown (see Appendix 4/2) shows that such is not the case; in addition to the 100% ‘cream off ’ in the first year, Units were surrendered from the Policy (i.e. money was charged) for stamp duty.

Following from the above, and from our previous Decoding of the Investment process, it is clear that the BENEFIT CHARGES AND POLICY CHARGES, as stated in Paragraph 13 of the policy Provisions, Privileges and Conditions (see Document 6C of Appendix 1/6), are charges in addition to the 100% ‘cream off’ of the first year’s premiums and the 4% ‘cream off’ of each subsequent year’s premiums, and are also in addition to the management charge of % per month — this being the ONLY charge mentioned prior to contract.