According to a YouGov survey by insurance provider Paymentshield, half of UK adults under 35 are mystified by the mortgage process.
The findings from the research show that there is a worrying knowledge and confidence crisis among potential first-time buyers (FTBs), 52% of UK adults aged 18-34 say they have a fairly or very bad understanding of the whole mortgage process from beginning to end.
Understanding of the mortgage and insurance process across age groups
Paymentshield’s findings also show a direct correlation between age and the understanding of the mortgage process. According to the research, 32% of 35 to 44-year olds didn’t understand the mortgage process and this lowers to 25% among those aged 45-54.
British adults under 35 were also baffled by the types of insurance required at different stages in life, with 53% declaring their knowledge fairly or very bad. This could also explain the survey’s finding that if they were purchasing home insurance, 25 to 34-year-olds would prefer to do so via comparison sites rather than by consulting a professional broker or financial adviser (40% vs 6%).
Why don’t younger people understand the insurance and mortgage process?
Paymentshield’s findings suggest one of the biggest barriers to understanding the insurance and mortgage processes could be financial jargon: 33% of 25 to 34-year olds say they are not very or not at all confident that they’d comprehend the language used to explain financial products and/or services, and 37% of respondents in the 18-24 age group feel the same.
James Watson, sales director at Paymentshield, said: “The finding that 25 to 34-year olds are nearly 7 times more likely to say they would prefer price comparison sites to seeking financial advice if they were purchasing home insurance is alarming, and risks leaving this already vulnerable cohort with insurance unfit for their needs."
He added: “Hopefully, measures like the implementation of the FCA’s GI pricing practices study will go some way to address this by creating a fairer marketplace that offers consumers products focused on value, rather than an automated race to the bottom where the cheapest price is offered at the expense of all other considerations.”
Watson advised financial advisers: “Even beyond the end of Stamp Duty holiday, the FTB market presents a key opportunity for advisers: this is a cohort lacking in confidence and knowledge about both the mortgage and insurance processes, meaning that they need more guidance. Advisers are perfectly positioned to support them – and not just for a one-off transaction: FTBs also have more overall needs in terms of General Insurance.
“By targeting FTBs and providing valuable, tailored and, as the YouGov survey suggests, necessary guidance, advisers have the opportunity to become a trusted expert who these buyers can rely on and recommend for the rest of their life.”