With the word mortgage deriving from the French translation of death pledge, it may not be surprising that many homeowners are feeling the pressure of getting one in the first place.
New findings from online mortgage broker Trussle have shown that two in five people suffer from stress when getting a mortgage, which is the equivalent to 625,000 new people every year.
In the UK, 1.5m new mortgages were approved in 2017, and each customer required 219 pieces of paper to complete their home purchase. From an environmental perspective alone, this equates to 38,600 trees to be felled annually, which is especially wasteful when you consider this is an issue that could be avoided.
Not only when considering the ecological impact, filling out 219 pieces of paper for your new home is an extremely draining process, and takes away from time that could be better spent elsewhere.
Of the homeowners surveyed, 70% want mortgage lenders to go digital, considering that 41% find the whole process stressful.
- Paperwork, and complex language and jargon are seen as the biggest contributors to stress
- Of borrowers surveyed, 73% would like online access to mortgage balance, and 70% were in favour of downloadable statements
As a result of paperwork being so time-consuming, some borrowers risk lapsing into their lender’s high-risk Standard Variable Rate (SVR). This can cause significant financial damage and unnecessary extra stress on what can often be a time-consuming and confusing process.
The way this works is that, for example, until a homeowner has sent their annual mortgage statement to their new lender – along with personal documents, such as their passport – they won’t be able to switch. This can mean that, if any statement is lost, under the current system, it can take up to six weeks to replace a lost annual mortgage statement. During this time, the average customer lapsing onto their lender’s SVR would pay almost £400 more a month on average.
How was this £400 per month figure calculated?
- This figure is the difference in annual cost between being on the market-leading two-year fixed rate deal, measured by true cost, and the average SVR on the market.
- The average August 2017 house price £225,956 (£135,573.60 mortgage at 60% loan-to-value (LTV))
- Average SVR on 5th January 2018: 4.82% (£6,471.82 interest in first year)
- Lowest two-year fixed rate deal by true cost: 1.36% (£1,815.29 interest in first year)
- Therefore, it comes to a potential saving in interest of £388 per month
Ishaan Malhi, the CEO and Founder of Trussle, said: “I’ve experienced the frustration of struggling to secure a mortgage first-hand. There‘s too much jargon, too much complexity, and not enough transparency.
“Millions of people lose out not only financially, but emotionally, as a result. Your mental health is no less important than your financial or physical health, so I’d like to see modern brands working hard to reduce the friction and stress of their products and services.”
He added: “The mortgage sector has traditionally been one of the worst offenders, with 40% of borrowers finding the process stressful and a third sitting on the wrong mortgage, collectively spending £15 billion a year too much on interest as a result.”