Research from Boon Brokers revealed striking gaps in mortgage knowledge among first-time buyers (FTBs).
A survey conducted by Boon Brokers noted that 84% of FTBs were unaware of how to secure the best mortgage interest rates, and 97% hadn’t learnt about mortgages in school.
Additionally, 93% didn’t know the deposit needed for favourable interest rates, and 82% didn’t understand how late payments affect their credit file.
Among older respondents, 90% of over-55s were also uninformed about late payments’ impacts.
Only 21% of men could correctly identify that mortgage rates are tied to loan-to-value (LTV) ratios, compared to 12% of women.
The study also mentioned a lack of formal education in finance, with 97% of respondents saying they learnt about mortgages outside a classroom, mostly from family.
Gerard Boon, managing director at Boon Brokers, said: “Loan-to-value is the key driver of mortgage interest rates.
“As a mortgage is the largest financial commitment that most people will ever own, it’s vital that the general public understand what dictates their mortgage payments.
“Without this knowledge, they may unknowingly agree to a mortgage with a higher interest rate than is necessary.”
Boon added: “For example, as interest rates change in 5% brackets, if someone has a 24% or 25% deposit, this could significantly impact their available interest rates.
“By just having that extra 1% deposit in this scenario, they may be able to access far lower interest rates.”
Research found that regional differences showed slightly better mortgage understanding in the Southwest of England, while the gender gap was linked partly to male-dominated financial sectors.
The misuse of social media for financial advice further complicates the issue, with a concerning trend towards reliance on influencers for information.
Usage of ‘buy now, pay later’ products and the social pressures to have the latest gadgets only further skew public attitudes towards debt.
Boon concluded that the cycle of misinformation could perpetuate itself through the next generation without intervention.
