Admittedly, you tend to have a greater level of immersion in a subject when it’s your day job, but surely everyone who has a mortgage and all those who aspire to have one, are fully aware of what’s happening with their own mortgage, their own finances, and their ability to secure the finance they need?
Well, it might be hard to believe, but the answer is no. Not everyone spends every waking hour thinking about cuts to rates, fee levels and how to get through today’s far tighter affordability constraints. Indeed, the be all and end all for many clients is simply a question of whether they can get the mortgage and how much it’s going to cost per month.
If you were looking for evidence of this disconnect between borrowers and their mortgage finance, then witness the recent findings from Which? which focused on borrowers’ knowledge about their own mortgage. The research showed that one in three were completely unaware of their mortgage rate, which is staggering given the almost constant chatter about when the next Bank Base Rate rise is going to happen and the impact this could have on many people’s monthly costs.
Four out of 10 of those who did not know their rate were also unaware that a Bank rate rise could increase their monthly payments, depending of course on what deal they were currently on. However, this level of awareness was much more evident among those who did know what rate they were on – 90% knew exactly how a rate rise might impact on them.
It’s a mixed bag as you might expect but it does give you an interesting insight into how many members of the public view their mortgage and how they might go about securing increased amounts of mortgage cash via refinancing. We might all like to think the average borrower in the UK is using a mortgage adviser, has total confidence in their advice, and is therefore unconcerned about the rate, the monthly cost and how it could change. Perhaps, they overwhelmingly have fixed-rate mortgages which take away any such worry? Perhaps. But I doubt it.
Therefore, if a significant number of those borrowers are on trackers or SVRs which may mean an increase in monthly costs, how many will have the finances to cope, and how many might be perfect candidates for a remortgage?
As a profession we need to try to make the mortgage far more important to the individual. Let’s stress what could happen when bank rate increases and let’s help them understand that action now could be very worthwhile in the future, especially if they want greater certainty and don’t want to have to worry about a rise in payments in the short-term.
Increasing the knowledge of borrowers is going to pay dividends for all. That greater understanding means they are much more likely to act in advance of any change which could negatively affect them. It also means they’re much more likely to seek out advice – knowing what the mortgage rate is, what the payments are may well make them more aware of what else is going on in the market, and where to access more competitive rates and deals. For one it will get them on an adviser’s database and will mean they can receive information on the above.
And ultimately of course it keeps them in the best place possible for whatever might come over the horizon. In essence, there are no downsides to increasing the public’s mortgage education, so let’s make sure we do our bit to make it happen.