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Mortgages laid bare
by Sarah Modlock
If you find mortgage jargon confusing, you are not alone. In a survey by money watchdog the Financial Services Authority, nearly six out of 10 consumers said they did not know what APR (annual percentage rate) stood for.
In addition, 52% of 800 mortgage holders interviewed were unaware what APR they were paying. To educate consumers about mortgages, the FSA has launched a new website.
The FSA, which assumed regulatory responsibility for mortgages last year, says it wants to help explain mortgages to consumers and is spending £1.5m publicising its new website called www.mortgageslaidbare.info.
The site is illustrated by cartoon images of naked people to emphasise that it is 'stripped bare' of jargon. It brings together for the first time new and existing FSA mortgage tools and resources. The tools include budget calculators that will help consumers work out how much they can afford to borrow and how much a mortgage will cost them each month; mortgage tables that give consumers a list of what mortgages are available on the market to help them shop around and a 'Firm Check' service so consumers can check that the firm they are dealing with is authorised.
The consumer research commissioned by the FSA on what UK mortgage holders and first time buyers knew and felt about buying a mortgage showed:
• 56% of first time buyers and mortgage-holders did not know what APR (annual percentage rate) stood for;
• 52% of mortgage-holders did not know what their current APR was;
• 36% of mortgage-holders did not understand at least half of their mortgage product literature;
• 65% of first time buyers felt daunted by buying a mortgage
• 76% of first time buyers would like access to more impartial information about mortgages.
This work coincides with the first anniversary of regulation of the mortgage industry by the FSA. In the last 12 months, the FSA has carried out a range of consumer-focused work, including the introduction of keyfacts documents to help consumers understand the service being offered and the cost and features of the mortgage; research into the quality of advice given on equity release mortgage sales; and the quality of mortgage disclosure documentation.
'It use to be the case that consumers would be offered one type of mortgage by their bank or building society... these days there are so many different types of mortgages available, all with their own jargon,' says the FSA's David Whitely. 'Mortgage choice is a good thing but consumers need to arm themselves with more knowledge, this is where the website comes in,' he adds.
Click on to www.mortgageslaidbare.info
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