A recent study of 1,000 homeowners and homebuyers by Which?, saw 99.5 percent of responders unable to work out the total cost of mortgage deals based on a borrowing of £100,000. I’m sure that even when Which? contemplated the study they never expected to get a result that conclusive.
Which? did the test to demonstrate the spiralling cost of fees and emphasise that borrowers should not just be comparing mortgages by the headline rate alone. Although the Council of Mortgage Lenders has been quick to point out the limitations of the research (Which? asked consumers to rate the deals on offer only for cost over the period of the special deal), all acknowledge that the research has raised an important issue about the limitations of annual percentage rates.
It makes an important point though. Mortgage advice is now, more than ever, more relevant to people’s financial well-being. Quite poignant to the research is the fact that it shows even people who have mortgages struggle to understand the real cost of a deal. Speculation of increasing interest rates and purchasers focusing more on the cost of monthly repayments rather than the overall borrowed amount are two huge issues in the financial market at the moment which have the potential to send many borrowers into unforeseen debt.
You might ask why people find mortgages so difficult to understand but I believe the answer is straight forward. Experience (how many and how often does anyone change mortgages?) and busy lives mean that, understandably, most people are not interested or familiar with the pricing of mortgages products. And with an ever growing number of products and changing criteria, it’s not surprising in the wider world that consumers rely on advice.
This research serves as an acute reminder to brokers that the service we provide is not only essential but also a weighty responsibility that people hand over to us when they ask us to help finance their properties.
Who are Which?
Which? is the largest independent consumer body in the UK. The group aims to tackle across the board issues which concern consumers. Which? exists to make individuals as powerful as the organisations they deal with in their daily lives.
For more info about the research, click here.