Only 6% of first-time buyers have a good understanding of mortgages, research from the Mortgage Code Compliance Board has revealed.
With just a year before the FSA takes over the regulation of mortgages, the MCCB says the research highlights the importance of high quality mortgage advice to consumers.
Conducted from a sample of FTBs, it looked specifically at those taking out a mortgage to move house and those looking to remortgage without moving.
When asked, only 6% of FTBs said they had a good understanding of mortgages, and nearly half only some understanding, with the rest saying they “didn't know much at all.”
Significantly, the survey results showed that some customers were confused about the level of service they had received, whether advice or merely information, with some customers thinking that they had been given advice on products within an information-only sale. This is contrary to Mortgage Code guidelines.
The MCCB says it is considering these results carefully and will discuss its responses and findings with the FSA.
In particular, the MCCB says it is concerned that the FSA's proposals for the use of 'scripted questions' in non-advised sales could blur even further the boundaries between the different levels of service provided by a firm and lead some customers to believe they had received a form of advice or recommendation.
Luke March, chief executive of the MCCB, says: “As the mortgage market in the UK is worth around £250bn per annum and more than two million mortgages are taken out every year, it is important that there is complete clarity when mortgage advice has been provided, especially to meet the needs of first-time buyers.
“This data was collected to build on the information obtained via the compliance monitoring visits of our MCCB inspectors, and we have identified areas of high consumer satisfaction, along with areas where we will work with intermediaries and lenders to improve.”
In general, however, many borrowers said that they were satisfied with the service they had received from their mortgage lender or mortgage intermediary.
As many as 95% of respondents felt that the mortgage salesperson did a good job of finding a mortgage that suited their needs, with 93% stating that they understood the reasons why a particular product was recommended.