Research highlights low levels of mortgage literacy in Ireland

13 June, 2016: New consumer research has uncovered a serious mortgage literacy problem in Ireland, with almost seven in ten consumers not knowing how much interest they will pay a lender over the life of a mortgage. When asked to calculate the Loan to Value (LTV) for borrowings of €200,000 on a house worth €250,000, almost half (48%) answered incorrectly.

The research was commissioned by Mortgage Brain Ireland, the leading provider of mortgage software for brokers, lenders and consumers, and the company behind the ‘IrishMortgages’app, Ireland’s first free mortgage comparison and calculator app. Undertaken by Coyne Research, the survey involved over 1,000 adults aged 18+ year, comprising people who currently have a mortgage, those who don’t have a mortgage and those likely to take out a mortgage in the next 12 months.

The research was commissioned to assess the level of capability among Irish consumers in understanding mortgages and making basic calculations. Of particular note are the low levels of mortgage literacy amongst those who are likely to take out a mortgage in the next 12 months, and amongst the younger age cohorts (18-34s), where the knowledge gap is most evident. According to the survey results, there was also a widespread gap in knowledge across the various groupings with more than half (55%) of the population unable to correctly note the impact on interest paid on a 25 year mortgage versus a 35 year mortgage.

Commenting on the research findings, Michael Quinn, managing director at Mortgage Brain Ireland said: “The research has highlighted the surprisingly low levels of mortgage literacy in Ireland. We must therefore invest greater resources in financial education for consumers so they can make smarter decisions when it comes to managing their mortgages and making the right choices. Education and capability building is an urgent priority – particularly for the 18-34 age group and this must occur as a matter of urgency.” Speaking on behalf of his mortgage broker network, Trevor Grant, Chairman of the Association of Expert Mortgage Advisors (AEMA) said: “It is clear from this research that the consumer needs to be educated before they take out a mortgage, at the point of sale, not after the loan documents have been signed. Paradoxically, it is in the lenders interest to have ‘smart’ rather than ‘uninformed’ borrowers. There is no doubt that face-to-face interaction between the mortgage broker and borrower has a role to play in reducing the problems associated with financial illiteracy and the associated risk of mortgage default. We at AEMA are committed to playing our part in addressing these concerns.” Last year, Mortgage Brain launched its ‘Irish Mortgages’ app, which is entirely free, placing important benefits and features at the fingertips of anyone who is looking at various mortgage and affordability options in Ireland. Key features of the app include the ability to calculate how much a mortgage will cost per month, the size of deposit and income you will require and a simple in-built calculator to determine how much an individual or couple can borrow based on the latest Central Bank lending rules.