Over-complicated documents, confusing language and excessive small print are all to blame for thousands of consumers overpaying on their mortgages.
More than half of homeowners with mortgages in the UK could save as much as £300 a month – a huge £3,600 a year – by switching to a different mortgage product, new research from online broker Habito has revealed. The study, which was conducted by the Universities of Manchester and Nottingham, found that a major reason people don’t shop around is due to the confusing jargon used in the industry.
Most of the people surveyed (95%) think the government should regulate to make mortgage and financing contracts easier to understand, with 90% saying all contracts should be made simpler.
Billions is being wasted
Getting your head around the complicated language involved in property buying and mortgages is crucial for anyone who already owns or is planning to buy a home, particularly for investors looking to achieve returns, as making the wrong choice could lead to major financial consequences down the line. An estimated £15.5bn a year is currently being paid out by consumers across the country unnecessarily, according to the data, on mortgages and financing products.
An A-level reading age is needed to understand most financial contracts, the study found, and households with the lowest reading ages are the most likely to be sitting on an overly expensive mortgage rate compared to those educated to a higher level.
Don’t sit on a variable rate
Dr. Peter Backus, senior lecturer in economics at the University of Manchester, said: “We also see that these households are more likely to be on variable rate mortgages, leaving them more vulnerable to future changes in the Bank of England base rate.”
More than half (52%) of people believe they have overpaid on something due to not understanding it properly, while 51% were confused by legal jargon and 48% were baffled by terms and conditions.
Daniel Hegarty, founder of Habito, said: “For too long banks and lenders have bamboozled consumers with over-complicated industry language, meaning people frequently sleepwalk into signing and staying on hellish long-term agreements that aren’t in their best interests.
“The fact that almost everyone wants regulation to force contracts to be easier to understand is hugely telling and we plan to campaign for that to happen.”
Before committing to any financial contract, particularly involving mortgages and homebuying, it is vital that buyers and investors fully understand the implications and details of what they are agreeing to in order to avoid losing out financially.
