The online mortgage broker Habito has carried out research that highlights the financial consequences of complicated documents that consumers are forced to read whenever they apply for a mortgage. One in four people have committed to a financial agreement without actually understanding it. Unfortunately, a lack of understanding brings a significant financial cost.
Consumers Lose Money When they Don’t Understand Official Documents
Approximately half of the people surveyed by Habito claimed that they had overpaid for something because the language used in the contract was too complicated to understand. Furthermore, 58% of mortgage-holders stated that they didn’t want to switch their current mortgage deal because they were intimidated by the complicated language and small print used in the contracts.
Unfortunately, when people choose not to switch mortgage deals they are losing money. On average, consumers could save £216 per month by changing to a better deal. Additionally, people are at risk of becoming trapped within noncompetitive products and paying inflated prices.
Is the Language Used in Mortgage Documents Really That Bad?
The language used in official documents significantly dis-empowers consumers and can leave them feeling embarrassed. However, this issue isn’t about the intelligence of consumers but rather how unnecessarily complicated contracts can be. Furthermore, if consumers don’t understand what they are reading, they are missing out on vital information.
According to research conducted by the University of Nottingham, some insurance policies require a PhD-level of education to fully understand them. But for many people, there is more to this issue than just the language used in contracts.
There is a direct link between basic financial literacy and being able to make significant financial decisions. There is currently a “crisis” in financial literacy. A third of people in England and Northern Ireland can’t work out the correct change from a shopping trip.
