Credit, Collections & Insolvency News
New research from online mortgage broker Trussle has reveals that 61% of current and soon to be homeowners in the UK don’t fully review their mortgage agreement before signing it, and half (50%) claim they only understand some of the language used in paperwork associated with the house buying process.
Speaking to 2,002 homeowners and those currently in the process of buying a home1 about their understanding of common mortgage jargon, Trussle reveals the true extent of the nation’s knowledge, to discover what lenders could be doing to better inform them.
Almost two thirds (66%)3 of current and soon to be homeowners admitted they don’t understand all of the terminology used in their mortgage agreement.
The research also reveals the key mortgage jargon which most homeowners or those in the process of buying a home were unable to correctly define and therefore need more education on:
Remortgaging, the process of switching a mortgage deal before the end of the initial period, is the phrase that most homeowners or those in the process of buying a home don’t understand, with only one in four (24%)4 admitting they know the definition. This finding suggests that current/soon to be homeowners don’t understand the importance of remortgaging, when in fact, if they don’t remortgage and slip onto their lender’s high-interest Standard Variable Rate (SVR), they risk losing an average of £4,500 a year9.
The research highlights that there are some key mortgage terms which current homeowners or those in the process of buying a home do have a clear understanding of, including those which can have a big impact on their monthly payments:
With the risk of moving onto your SVR potentially having a huge impact on the amount of money homeowners are paying out each month, it’s great to see that over three quarters (76%)12 fully understood the term.
Homeowners face a number of fees during the buying process. While the majority of respondents knew they were expected to pay for things such as early repayments (55%)15, an arrangement fee (54%)15 and building insurance arrangement (32%)15, nearly a third (31%)14 were not aware they had to pay a solicitor’s fee which can typically set homeowners back between £850 and £1,00016.
Perhaps most shockingly, over half (58%)15 of those Trussle spoke to didn’t know they’d be charged for missing a payment on their mortgage, suggesting that the industry isn’t doing enough to educate and guide borrowers through the whole mortgage process and ensure they’re completely aware of all associated fees.
Commenting on the research, Dilpreet Bhagrath, Mortgage Expert at Trussle said “Mortgage terminology can be tricky to understand, and it’s clear that there’s still a lot of jargon in the industry that’s misunderstood. Buying a home is one of the biggest emotional and financial commitments someone will make in their lifetime. Yet, borrowers are being put at a huge disadvantage by not truly understanding the terminology used in their mortgage agreement.”
“It’s worrying that so many homeowners still don’t understand remortgaging, particularly as they risk falling onto an expensive Standard Variable Rate and could waste an average of £4,500 a year on high-interest rates. Across the industry, we need to educate borrowers so they understand what they’re getting into and how they can keep their mortgage on track.
