For the first time in a decade, the average age for a UK first-time buyer rose this year from 30 to 31, recent data from Savills shows. However, according to new research from Paymentshield, there is a huge knowledge gap among under 35s about how the mortgage process works.
A YouGov survey commissioned by the insurance provider suggests there is a startling knowledge and confidence crisis among potential first-time buyers, as 52% of UK adults aged 18-34 say they have a fairly or very bad understanding of the whole mortgage process from beginning to end. In comparison, 32% of 35 to 44-year olds stated the same lack of understanding, with this dropping further again to 25% among those aged 45-54.
UK adults under 35 displayed a similar lack of understanding of the types of insurance required at different stages in life, with 53% declaring their knowledge fairly or very bad. This could explain the survey’s finding that if they were purchasing home insurance, 25 to 34-year-olds would prefer to do so via comparison sites rather than by consulting a professional broker or financial adviser (40% vs 6%).
The research suggests one of the biggest barriers to understanding the insurance and mortgage processes could be financial jargon: a third (33%) of 25 to 34-year olds say they are not very or not at all confident that they’d comprehend the language used to explain financial products and/or services, with a similar proportion (37%) among the 18-24 age group.
James Watson, sales director at Paymentshield, says: “The finding that 25 to 34-year olds are nearly 7 times more likely to say they would prefer price comparison sites to seek financial advice if they were purchasing home insurance is alarming, and risks leaving this already vulnerable cohort with insurance unfit for their needs.
“Hopefully, measures like the implementation of the FCA’s GI pricing practices study will go some way to address this by creating a fairer marketplace that offers consumers products focused on value, rather than an automated race to the bottom where the cheapest price is offered at the expense of all other considerations.”
James adds: “Even beyond the end of Stamp Duty holiday, the FTB market presents a key opportunity for advisers: this is a cohort lacking in confidence and knowledge about both the mortgage and insurance processes, meaning that they need more guidance. Advisers are perfectly positioned to support them – and not just for a one-off transaction: FTBs also have more overall needs in terms of General Insurance.
“By targeting FTBs and providing valuable, tailored and, as the YouGov survey suggests, necessary guidance, advisers have the opportunity to become a trusted expert who these buyers can rely on and recommend for the rest of their life.”