Mortgage Jargon needs to be clearer!

by Mark Johnston

Mortgage Jargon needs to be clearer!

Mortgage lenders have gone to great lengths to revitalise the housing market by producing innovative and competitive products.

Moneyfacts, a comparison website, states that interest rates have plunged to all time lows. The rate on five year fixed deals has dropped almost 50 per cent since 2008 to less than 4 per cent.

However, a survey of recent home buyers showed that the house buying process is made even more daunting because there are so many different types of mortgage on the market.

Research has also revealed that even those people who already have a mortgage struggle to recognise the cheapest deals.

Some experts feel that the home buying process is clearly complex but mortgage lenders have a responsibility to make sure their customers understand what is going on.

A poor understanding about what is often the biggest purchase of someone’s life is deeply concerning.

Some experts feel that the home buying process is clearly complex but mortgage lenders have a responsibility to make sure their customers understand what is going on.

Jim Chadwick, marketing director of Barclays Mortgages, added “there is still a great deal that lenders could do to make sure that buyers really do understand what is happening when they are buying a new home.”

A study by consumer group Which? of around 1,000 home owners and home buyers found that 99.5 per cent of them were unable to work out the true cost of most mortgage deals.

Richard Lloyd, executive director of Which?, says “while it is good to see lenders now offering lower interest rates, mortgage arrangement fees have risen dramatically in the last two years making it increasingly important for borrowers to understand the overall cost”.

Industry insiders believe that lenders should be more transparent about the true cost of mortgages so that borrowers can more easily compare deals and find the best on for them.

Other research has shown that only half of people who have bought properties in the past three years, around 50 per cent, believe they know what a redemption penalty is.

Although overall, two fifths or 40 per cent of people said they had a poor understanding and nine per cent had no idea at all.

Perhaps more worryingly though, a quarter or around23 per cent of those people who claimed to understand redemption penalties were actually wrong.

Therefore many banks and building societies have recently been criticised for making it virtually impossible for consumers to work out the true and total cost of a mortgage.

However, the Council of Mortgage Lenders (CML) have insisted that home buyers are given ‘all the information they need’.

Sue Anderson, of the Council of Mortgage Lenders, adds “consumers do not usually have to make their choices based on very limited information”.

In conclusion, it seems that dealing with a mortgage provider can be a bewildering and overwhelming experience but borrowers should remember that if a mortgage adviser or bank uses terms you do not understand make sure you ask them to explain!



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