Almost one in five people with a mortgage don’t understand its related terms and processes, a survey has revealed.
The analysis by Compare the Market found that 16% of homeowners are confused by their mortgage.
They admit to still not fully understanding the process and the different terminology involved.
Confusing mortgage-related terms
The survey explored mortgage-related terms and which are the most confusing for people, along with how confident people feel about their mortgage knowledge.
It found that ‘LPA’ is the most confusing term, with only 7% of people in the UK knowing what it means.
Mind over mortgages: why we need to look after intermediaries’ mental health
Sponsored by Halifax Intermediaries
Most understood mortgage terms
Meanwhile, the most understood mortgage-related term is ‘fixed rate mortgage’.
However, just over half – 52% – of all respondents say they know the definition of a fixed-rate mortgage.
A fixed rate mortgage is a type of mortgage where the interest rate on your mortgage stays the same, usually up to five years, but the length of time depends on your initial agreement.
The term ‘stamp duty’ follows, with 47% understanding the term, which is the tax payable on buying a property.
‘Mortgage term’ is ranked third at 46%, and simply means the length of the mortgage.
At the other end of the scale, the least understood term is ‘LPA’, also known as a ‘lasting power of attorney’, which relates to the management of someone’s property and financial affairs – including a mortgage – if the person no longer has the capacity to manage their finances themselves.
The term ‘SVR’ follows, which stands for ‘standard variable rate’.
‘Capital on mortgage’ rounds off the top three – at 20%.
Mortgage knowledge seems to be better among those who don’t have a mortgage, with 7% of those who own a home outright saying they don’t understand mortgage terminology, while it is 12% for solo renters.
Looking at specific regions of Britain, Norwich has the least knowledge, with nearly a quarter of residents (23%) admitting they don’t fully understand mortgages even though they have one.
Following in second place is Newcastle, with 21% saying the same, and London is ranked third with 19%.
