More than a quarter of mortgage holders do not know what interest rate they are paying, according to new research by the Homeowners Alliance.
The survey unveiled widespread ignorance of common mortgage terms, with more than half of homeowners admitting their knowledge of different products was ‘not good’.
In particular people had difficulty distinguishing between the Base Rate and short-term variable rates and tracker and discounted mortgages.
Despite this confusion, more than a third of borrowers said they had no idea how much help or advice from a mortgage broker would cost – suggesting most had never sought this guidance.
HomeOwners Alliance chief executive Paula Higgins says: “The fact that so many people don’t actually understand the product they’re taking out is worrying to say the least.
“Consumers must be able to take responsibility for their finances but in order to do this they need access to expert knowledge and guidance.
“With household debt at a record high the consequences of not understanding your financial situation are very easy to see. Homeowners are at risk of sleeping walking into financial misery.”
She urged consumers to seek advice from a mortgage broker, or to access guidance online to ensure they are better informed about their home loan options.
However, while the research found almost two thirds (64 per cent) of adults said they didn’t understand the terminology used by mortgage providers, the majority of adults (75 per cent) claimed to be confident that they could budget and manage their money effectively.
A total of 58 per cent said they understood what was required to qualify for a mortgage. However, people are less sure of themselves when it comes to selecting the best mortgage deal. Four out of 10 adults said they ability to choose the right mortgage for their needs was “not good”.
The survey found women tended to be less confident than men in rating their knowledge of mortgage terminology. However, in reality women have similar or better knowledge than men when it came to asking about certain features of a mortgage, including fixed-rate mortgages, negative equity, arrangement fees, flexible mortgage and mortgage agreements in principle.
Article published by Mortgagestrategy - 15th November 2017