Do you know how much your mortgage costs over its lifetime? According to new research, Ireland has a serious mortgage literary issue. Almost seven in ten consumers are unaware of how much interest they will pay to their lender over the duration of their loan.
Commissioned by Mortgage Brain Ireland (which launched its free app last year) and undertaken by Coyne Research, the survey involved over 1,000 adults, comprising those with and without mortgages, as well as people who are likely to take out a loan in the next 12 months. When asked to calculate the loan to value for a mortgage of €200,000 on a house worth €250,000, 48% answered incorrectly. Over half of the respondents were unable to correctly identify the interest impact between a 25-year and 35-year mortgage.
The survey noted that the lowest levels of literacy were found among those likely to take out a loan over the next 12 months, as well as among the younger age group of 18 to 34-year-olds.
“The research has highlighted the surprisingly low levels of mortgage literacy in Ireland. We must therefore invest greater resources in financial education for consumers so they can make smarter decisions when it comes to managing their mortgages and making the right choices,” said Michael Quinn, managing director at Mortgage Brain Ireland. “Education and capability building is an urgent priority – particularly for the 18 to 34 age group and this must occur as a matter of urgency.”
Trevor Grant, Chair of the Association of Expert Mortgage Advisors (AEMA), has also called for greater financial education for Irish consumers. “It is clear from this research that the consumer needs to be educated before they take out a mortgage, at the point of sale, not after the loan documents have been signed,” he said. “Paradoxically, it is in the lender’s interest to have ‘smart’ rather than ‘uninformed’ borrowers. There is no doubt that face-to-face interaction between the mortgage broker and borrower has a role to play in reducing the problems associated with financial illiteracy and the associated risk of mortgage default.”