08 Oct Consumers research mortgages less than holidays
A recent piece of research completed by Noddle offers startling evidence in the approach newcomers take to mortgages. In fact, the research revealed that people spend more time researching their next holiday than they do finding out about their first time home buyer mortgage.
Research on mortgages low on priority list
Considering the financial implications, lifestyle impact and the long term commitment involved this information is jaw dropping. For many of us it would stand to reason that the opposite would be true. The findings of this research reveal that the average consumer spends a whopping five days on holiday research. Even the family car gets a better place in the research stakes enjoying a whole six days before a decision is made. However, mortgages only average 3.6 days from research to decision. This is only a little more than the length of time that consumers spend on making less life changing decisions. This includes that of buying a new outfit for a special occasion – 2.9 days
Mortgage Product variety
Perhaps the most alarming statistic is that 26% of respondents indicated that they took the first mortgage product offered. That is over one in four first time mortgages. Once they had an offer, their response was to look no further. Arguably one of the most expensive financial mistakes a person can make.
Admittedly the first offer may not be the wrong choice. However, considering that a fixed rate two year deal from high street lenders can vary as much as between 1.84% to 4.22%, shopping around should be the default decision. These figures are derived from those products offered with a £995 product fee as of June 2018.
It all adds up when you consider that a borrower could be £3000 a year out of pocket between the best and worst rate on a £200 000 mortgage. Add that kind of mistake up over the lifetime of a mortgage and the consequences are breath taking.
Reasons given for this poor decision making process is lack of knowledge. With those surveyed 36% cited the fact that they know little to nothing about mortgages. Consequently, their research was sparse and random. This lack of research as resulted in 17% of these surveyed unhappy with the product they have chosen and stuck in the contract. With early repayment charges being steep, this could be a costly process to experience.
It’s the emotional factor that also plays a part. When a homebuyer has found a house that they have fallen in love with, the pressure to get a mortgage can end common sense out of the window. This is made worse when competing against others who also have an eye on the same property. The snap decision made on taking a mortgage can have severe financial consequences. With thousands of pounds at stake, it makes sense to do research more thoroughly.
Understanding your credit score as well as how rates and different products vary across the market is a good place to start. An experienced mortgage and financial broker will also advise newcomers to the mortgage world. Many will have in depth knowledge of alternatives. This not only applies to first time buyers new to property, but also to those obtaining mortgages for the first time in many years. Mortgage products and financial markets change so quality research into what you’re getting into is critical.