A staggering 99.5% of UK homeowners and homebuyers are confused about the total cost of their mortgage deal, according to the latest research.
According to a survey conducted by consumer champion Which? the majority of consumers who have already secured a home of their own, or are trying to make their first foray onto the property ladder, are in the dark about the myriad of costs involved in buying a home.
Just 0.5% of the 1,001 consumers questioned were correctly able to rank five 2-year fixed rate mortgages in order of costs over two years including arrangements fees and repayment charges. This related to £100,000 of borrowing.
Further figures showed that almost half of those questioned found the test was easy, just over a quarter (27%) could identify the costliest and cheapest of the five deals.
Responding to the survey findings, the Council of Mortgage Lenders (CML) argued that the research was flawed.
Sue Anderson, head of member and external relations at the CML, said: “The mortgage process includes a number of checks and balances to try to ensure that consumers understand the whole picture of the rate, fees, charges, and total costs and characteristics of the mortgage they eventually choose.
“Consumers do not, in real life, have to make their choices based on the very limited information that Which? used to gauge consumer awareness and capability to decide on which loan represented the cheapest option.”
However, the CML did concede that APR may have some limitations. Expanding on this point, Anderson said:
“The more important issue that the Which? data reveals is the limitations of the APR.
“Although the APR is a useful tool, it cannot be used in isolation from the other important disclosures about cost.”