Seven out of ten (69 per cent) homeowners do not read thoroughly through the terms and conditions of their mortgage before signing, new research from Reach Financial Services reveals.
A relatively large proportion of people (29 per cent) are unaware of what their current mortgage rate is and over half (54 per cent) of borrowers on a fixed-rate mortgage do not know when its term ends.
The research also found that a huge percentage of people (81 per cent) would have to reduce their spending on essentials like food and heating or things like travel if their monthly payments increase in the future.
Over two-thirds (69 per cent) worry about the impact a potential increase in monthly payments would have on their financial situation and nearly two-thirds (61 per cent) say they would not be able to cope with a future increase of £100.
Reach director Kevin Blount commented:
“We decided to do the research after hearing that the Financial Ombudsman Service had been inundated with complaints from mortgage customers following rises in interest rates, which they claimed not to know about. In fact, 19 per cent of people who responded to the survey were completely unaware that their mortgage interest rate could change, even if the Bank of England makes no change to interest rates as a whole.
“Of course, this will all be clearly stated in the terms and conditions, but as we’ve discovered, hardly anyone is actually reading them. It’s concerning that people are entering into a long-term financial contract without being fully aware of what they are signing up to.
“This should give the industry food for thought and it prompts the question – are T&Cs too complex? Our team spends time explaining products to our customers, but are others doing the same?
“We know that money remains tight for a lot of people and some in the industry are obviously running the risk of inadvertently tipping people into financial hardship unless processes change.”
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