Finance jargon baffles homeowners

People are baffled by the jargon surrounding mortgages, with homeowners admitting to a low level of knowledge about their mortgage deals, according to a survey undertaken for the City watchdog.

Research for the Financial Services Authority (FSA) revealed that 56% of first-time buyers and borrowers did not know that the acronym APR stood for annual percentage rate.

Of those with a mortgage, 52% said they did not know what interest rate they were paying on their home loan, while 36% said they did not understand at least some of the literature they had received about it.

Perhaps unsurprisingly, some 65% of first-time buyers said they felt daunted by the thought of finding a mortgage, and 76% said they would like access to more impartial information about the subject.

In an attempt to fulfil this need, the FSA has launched a new website for consumers, www.mortgageslaidbare.info.

The site brings together a range of information and tools, including budget calculators, mortgage tables and a firm-check service enabling consumers to check that their lender or broker is FSA-authorised.

A spokesman for the FSA, David Whitely, said the website was designed as a "first step", not an alternative to advice.

"The website isn't aimed at replacing the sales process," he said.

"It's for people to get some basic information before they sit down with an adviser or they go to a lender so it's not such a daunting process and it doesn't seem such a mystery."

The launch comes almost a year after M-day, when new rules designed to make buying a mortgage more consumer-friendly were brought into force.

"It's only a year since mortgage regulation and we have done a lot to change the shape of the mortgage market, including introducing things like the key facts document giving the consumer full details of any mortgage," said Mr Whitely.

He said the FSA had been working with lenders to ensure consumers are being offered clear information before they take out a home loan.