27 October 2023 , 10:08
1073
0
First-time buyers remain baffled by mortgage jargon – such as negative equity, stamp duty and conveyancing.
As a result, 60% are worried it’s slowing the purchase down, and 52% fear they could miss out on a better deal because they can’t get to grips with the terminology.
The study of 1,000 adults in the process of getting on the property ladder also found terms like annual percentage rate, underwriting and decision in principle are puzzling prospective buyers. But 35% of these also think mortgage product names make them difficult to understand what they actually are.
And many don't know if the likes of Shared Ownership or Joint Borrower, Sole Proprietor mortgages will actually suit their needs, while 39% would even like to see mortgage products renamed so that they are easier to understand.
The research was commissioned by Skipton Building Society, as part of its campaign to simplify the homebuying journey to enable more first-time buyers to step onto the property ladder.
8 money changes coming in February including Universal Credit and passport fees
Nearly half of Brits wish they were taught about the property ladder in school - to help them feel more prepared now (Getty Images)Jen Lloyd, head of mortgage products at the building society, said: “In an increasingly complex landscape of mortgage terms and product names, first-time buyers are finding themselves navigating uncharted waters. And without the right guidance, they can often overlook some of the mortgage options that could potentially help them to step onto the property ladder sooner rather than later.
“We want to cut down on the jargon to ensure these buyers are aware of all the options that are available to them. By understanding the challenges, we are committed to simplifying the process with the goal to empower individuals to make informed decisions and help them realise their dream of home ownership.”
When it comes to demystifying the complex jargon, 34% of those polled are seeking clarity from their parents rather than the mortgage experts themselves. With another 35% choosing to use the internet, but not banking sites, to try and increase their understanding.
Throughout the process, these bewildered buyers have found applying for a mortgage, dealing with their solicitor and finding a mortgage the most confusing - consequently, 77% of these say this has added to their stress levels.
It also emerged 79% of all first-time buyers feel the homebuying process would run a lot smoother if everyone just spoke in layman's terms, and 41% have had to bluntly ask someone to speak in more simplified terms during their journey.
Due to the complexities faced when buying a home, 46% wish they had been taught more at school about it so they would be more prepared now it is finally upon them.
Almost 8 in 10 say applying for a mortgage, dealing with their solicitor and finding a mortgage have been the most confusing parts of the process (Getty Images)The research, conducted via OnePoll.com, also found 24% of those currently trying to buy their first home are receiving financial support. Of these, 83% feel it is ‘impossible’ to get on the property ladder without a cash injection from elsewhere.
Nearly six in 10 (58%) of these have been given a lump sum towards their deposit, while 32% have been offered help with moving costs. And 23% of these found the Joint Borrower, Sole Proprietor mortgage to be the best option for them for getting onto the property ladder.
Jen Lloyd, from Skipton Building Society added: “Getting on the property ladder has become increasingly challenging, and we recognise financial assistance is often essential for aspiring homeowners.
“Which is why we are renaming the Joint Borrow Sole Priority Scheme – simplifying the name to ‘Income Booster’ scheme, highlighting exactly what this product is about - and hopefully in the long run, encouraging even more prospective buyers to find out more about it.”
Big Four banks made £20billion in 9 months as households battled interest rates
William Rice, CEO of Generation Home said: “It’s central to our mission to make homebuying simple, transparent, and fair. Industry terms like ‘joint borrower sole proprietor’ hinder buyers’ understanding and make it more difficult for people to advocate for themselves as they undertake one of the most important financial decisions of their lives.”
TOP 20 MOST CONFUSING MORTGAGE TERMS:
- Negative equity
- Stamp Duty
- Porting
- LPA
- Conveyancer
- Drawn-down
- Securitisation
- Underwriting
- HM Land Registry
- Mortgage deed
- Mortgage illustration
- Annual Percentage Rate
- Decision in principle
- Loan to Value
- Capital repayment
- Standard variable rate
- Transfer deed
- Interest-only mortgage
- Product period
- Interest rate type