One thing that becomes clear to a foreigner after even a short time in Britain is how obsessed people are with homeownership. Expressions like “getting on the housing ladder”, “you can’t go wrong with bricks and mortar” or “rent is throwing money away” are all too common.
Despite this obsession — or maybe because of it — it turns out that the British are not all that careful when it comes to making sure they fully read and understand the terms of their mortgage.
Three quarters of homeowners admitted to not fully reading financial contracts before signing them, while one quarter said that they have committed to a financial agreement without understanding the language used in it, research from online mortgage broker Habito showed.
The research was carried out between May 30 and June 4, 2018 among 2,004 UK adults with a mortgage.
When it comes to arguably the most important expense for many people, 34% of those surveyed admitted they actually signed up to their mortgage without finishing reading the terms. Almost half (46%) only read up to a quarter of the way through a mortgage contract before signing it.
If you are wondering how this can be possible, you are not alone. After all, a mortgage is a huge commitment and getting it wrong could mean homelessness and ruin.
Habito – which has a vested interest, as it markets itself as a company aiming to tackle jargon in mortgage industry – teamed up with linguists and economists to look at how understandable the mortgage contracts really are.
It found that the educational reading age needed to fully understand the language used in mortgage contracts is A-level, which almost 50% of the UK adult population don’t have. The University of Nottingham’s Linguistic Profiling for Professionals (LiPP) department, which combined seven independent readability measures such as tracking average word length and average sentence length, carried out this research.
This less educated the people, the hardest hit they are. Households with a GCSE reading level are staying on costly deals up to 12 months longer than those with a higher-level education, according to additional research by Dr. Peter Backus, senior lecturer in Economics at the University of Manchester.
Around 90% of those surveyed by Habito think the language used in contracts could be simplified. Among the things that should be rewritten or made easier to understand are legal jargon, confusing terms and conditions and the explanations of the implications of not adhering to the contract.
However, while it is true that banks, brokers and other financial services companies should do more to simplify their literature, the customers in their turn could do with a bit more financial education. Ultimately, “an investment in knowledge pays the best interest.”