Survey reveals gaps in mortgage knowledge, with calls for education to start in schools
One in six UK mortgage holders (16%) admit to not fully understanding the mortgage process or the terminology involved, according to a survey by Compare the Market.
The price comparison website examined the terms that people in the UK find most confusing and assessed overall confidence in mortgage knowledge. Surprisingly, those without a mortgage displayed greater understanding, with just 7% of homeowners who have paid off their mortgage and 12% of solo renters admitting to a lack of understanding.
Among mortgage-related terms, “fixed rate mortgage” was the most familiar, with 52% of respondents saying they understood its meaning. A fixed rate mortgage, of course, refers to a home loan where the interest rate remains constant, typically for a set period such as five years, depending on the agreement.
Other widely understood terms include “stamp duty” (47%), the property tax paid upon purchase, and “mortgage term” (46%), which refers to the length of the mortgage.
However, several key terms remain unclear to many. Only 7% of respondents understood the meaning of “LPA” (lasting power of attorney), which involves managing someone’s financial affairs, including their mortgage, if they lose the capacity to do so. The term “SVR” (standard variable rate), which describes a lender’s default interest rate, was understood by just 12%, while “capital on mortgage” – referring to the portion of a mortgage repaid through regular instalments over time – was recognised by only 20%.
The survey also highlighted strong support for mortgage education, with 71% of respondents saying the mortgage process should be taught in schools. Among Gen Z respondents (aged 16 to 26), 62% supported this idea, compared to 76% of the Silent Generation (aged 78 and above).
“Understanding mortgages is really important because it not only empowers homebuyers to make informed decisions but ensures they select the loan terms that best align with their financial goals,” Compare the Market stated.
Any thoughts on this story? Share them with us by leaving a comment in the discussion box at the bottom of the page.
