A fifth of all Brits say they cannot confidently describe a mortgage
Not understanding the home-buying process and key terms associated with it is putting around 2.2 million potential owners off buying a home, according to new research from Zoopla.
43% of UK adults who don’t own a home said they do not feel confident in their knowledge of the home-buying process, of which 27% said this has stopped them from buying a home.
20% of all UK adults say they cannot confidently describe a mortgage. In fact, 9% say they do not understand any of 25 key terms relating to home-buying.
Key terms are misunderstood
Despite mortgage rates being top of the news agenda for months (and not disappearing from it any time soon), 24% of UK adults overall could not accurately identify the difference between a fixed rate, interest only and an offset mortgage - and just 43% could correctly identify an interest-only mortgage.
‘Gazundering’ is revealed to be the least-known term (10% know it), followed by ‘disbursements’ (15%), ‘buying schemes’ (17%) and ‘covenant’ (17%). Concerningly, 54% of UK adults are unable to describe words like ‘completion’, ‘lease’ (54%), and ‘stamp duty’ (55%).
Stamp duty was something just 45% of UK adults could confidently describe. When asked about the specifics of it, only 27% could accurately identify that it must be paid within 14 days of the date of completion of the property purchase.
18% of UK adults also incorrectly believe you can never avoid paying stamp duty - when in fact in England it only applies to homes worth over £250,000, rising to £425,000 for first-time buyers on homes costing up to £625,000.
There are multiple schemes available to help first-time buyers get on the property ladder; such as shared ownership and the mortgage guarantee scheme. Yet 90% couldn’t confidently describe more than half of the schemes listed.
For example, the Lifetime ISA can help you get on the property market for the first time, however, 57% of UK adults couldn’t describe it accurately.
This demonstrates how potential homeowners could be missing out on taking advantage of schemes that could get them on that first rung of the property ladder, but are too overwhelmed and confused by the terms and processes to do so.
Home-owning parents provide a leg up onto the property ladder
Whether or not someone's parent owns a property or not also plays a key role in getting onto the ladder. For example, those whose parents are not homeowners are twice as likely to admit they don’t know what a fixed-rate mortgage is (14%) than those whose parents do own a home (6%).
Surprisingly, UK adults are a third more likely to own a home if their parents are homeowners (72%) than if they are not (55%). The knowledge and advice people get when their parents are home-owners could be a factor. UK adults whose parents own homes are over three times more likely (49%) to receive advice from them than those whose parents do not (14%).
Where can UK adults turn for advice?
An overwhelming 82% of UK adults who own a home admit to finding the process complicated and hard, with less than one in five saying they felt confident throughout (18%).
Zoopla is encouraging prospective home buyers to use its Step-by-step guide to buying a home, which offers home movers everything they need to know about the process, from working out what they can afford to making an offer and completing.
Daniel Copley, Consumer Expert at Zoopla, says: “The research shows that many UK adults - including those who already own a home - have a significant lack of knowledge when it comes to what even the most basic and commonplace home-buying terms mean.
"It’s usually presumed that finances are the reason someone doesn’t own their own home, but the figures show that for millions of people, it could also be a lack of knowledge that is holding them back.
“To help would-be buyers make the most informed decision they can when it comes to buying a home and arm them with the key knowledge, our step-by-step guides offer prospective home-owners all the key information they need to confidently embark on their home-owning journey.
"They cover elements such as what to budget for, how to speak the language of the property market and what to look out for during the process.”
Here at Christopher Nevill our team of experienced property professionals will guide you through the home buying and selling process and are here to answer any questions you may have.
