The crisis surrounding the mis-selling of endowment mortgages was highlighted by the annual report of a City watchdog yesterday.
The Financial Ombudsman Service dealt with 70,000 new complaints from householders whose endowment policies will no longer pay off their mortgages in the year to March 31, a rise of 34 per cent.
And numbers are expected to increase as millions of new letters go out to consumers warning them of shortfalls.
Under-performing endowments accounted for two thirds of all complaints and the extra workload helped send the FOS spinning into a financial crisis of its own.
With more than 1,300 new complaints flooding in every week, the organisation, which is funded by the financial services industry, clocked up a deficit of £ 1 . 8 million compared with a surplus of £4.5 million the previous year.
According to yesterday's report, the organisation had budgeted for a shortfall of £1.4 million last year. The additional £400,000 deficit was largely due to fewer than expected case closures, the point at which payments are triggered.
Since it was set up in 2000, the ombudsman's service has seen a fourfold increase in its workload and its staff has trebled to more than 950.
"We dealt with a record number of mortgage endowment complaints last year," chief ombudsman Walter Merricks said.
"The number we can expect to receive in the current year will largely be determined by how financial services firms meet the new regulatory requirements on so-called ' reprojection' letters - several million of which will be sent to consumers with endowment policies over the coming year.
"Most of these letters will warn of likely mortgage shortfalls and many will give, for the first time, an explicit deadline by which any complaint must have been lodged.
"These letters could result in significant increases in the numbers of consumers contacting their endowment provider and in sudden bulges in complaint volumes."
Industry regulator the Financial Services Authority has already found evidence of serious shortcomings in the way some firms handle endowment complaints and procedures are about to become even more testing and complex, Mr Merricks said.
He added that firms should be able to deal with the vast majority of complaints to the satisfaction of consumers without referral to the ombudsman service, which only steps in if the two parties cannot resolved a dispute.
About 12 per cent endowment complaints were referred to the FOS by claims management companies operating on a no win, no fee basis. The report warned however that while the success rate of these complaints was no higher than ones lodged by consumers, the companies charged between 25-50 per cent of any award made.
The ombudsman said no additional award was made to consumers to cover this, and no-one should need the help of a third party to lodge a claim.