A recent study by Halifax into first time buyer affordability shows that the house price to earnings ratio – a key affordability measure – has improved significantly over the past 18 months. With first time buyer affordability at its lowest level for more than five years, Halifax offers them help to better understand financial terminology and mortgage jargon.
A Key Facts Illustration (KFI) requires all lenders to set out the details of a mortgage product in the same format, so it’s easier for customers to compare mortgages. Despite this design, it seems the commonly used acronym KFI has left many first time buyers confused. Popular definitions proposed by first time buyers included Key Facts Instrument, Knowledge Facts Information and Knowledge For Improvement with 5 per cent, 24 per cent and 4 per cent respectively.
Four out of five first time buyers (81 per cent) correctly defined the term "completion date" as the day ownership of the property is transferred and you become the legal owner. Despite being known as "settlement" in Scotland, 87 per cent of first time buyers in Scotland knew the definition for completion date.
The term "gazumping" popularised in the housing boom in 1980s was best defined by 35 – 44 year olds, with 86 per cent correctly identifying the phrase. Unsurprisingly, only half of those who were toddlers or younger in that decade (18 – 24 year olds) were able to define the term as "your offer on a property is accepted but then subsequently turned down because a higher offer is placed by another potential buyer."
Jaedon Green head of mortgage development, at Halifax said: "Understanding mortgage jargon can be difficult for many first time buyers who are new to the housing market. Our experience shows they need a combination of advice, expert knowledge and mortgage deals which help make the first steps on the property ladder easier."
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