Almost two-thirds of home buyers and movers are confused by the terminology used by mortgage lenders and brokers.
A new survey by independent mortgage brokers Trussle has revealed that fewer than half of us read our mortgage agreement before signing up to borrow hundreds of thousands of pounds.
Lack of knowledge
And even those who are already homeowners admit they don’t fully understand exactly what remortgaging means.
For clarity, a remortgage is when you switch lenders but don’t move home, but only one in four people (24 percent) were able to explain that.
Trussle commissioned 4Media to survey 2,002 UK homeowners and those currently buying a home to ask them to reveal the depth of their knowledge about mortgages and the terms used by lenders in official paperwork.
Confounded by completion
Other common words used in lending that confused survey participants included completion – 40 percent didn’t know that means contracts have been exchanged on your home sale or purchase and the deal is complete.
More than a third (37 percent) were in the dark about what a mortgage term is. That’s the length of time the loan runs for.
And more than a quarter (27 percent) admitted they didn’t know what base rate means. The base rate is what the Bank of England charges banks and lenders when they borrow money, and it’s used to set the interest rates charged for mortgages.
The importance of understanding the terminology used by lenders is reflected in the fact that many borrowers are on fixed-rate deals. When those rates come to an end, their loan reverts to the lender’s Standard Variable Rate (SVR), which is often more expensive. Remortgaging is the way then to get the best deal for your finances.
Dilpreet Bhagrath is Trussle’s customer experience manager.
She said: “Mortgage terminology can be tricky to understand, and it’s clear 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 some borrowers are being put at a huge disadvantage by not truly understanding the terminology used in their mortgage agreement.”
To help clear up some misconceptions, Trussle has created a UK Mortgage Map of Knowledge that outlines where people have the best understanding of loan jargon and also explains the jargon itself.