- ‘LPA’ is the most confusing term related to property management and mortgages, as only 7% of people in the UK know its meaning
- 16% of people in the UK agree that although they have a mortgage, they still don’t understand them
- Nearly three-quarters (71%) of people in the UK believe that the mortgage process should be taught in schools
Soaring rates have made mortgages a hot topic in the UK. Despite this, the phrase ‘what is a mortgage?’ receives an average of 4,400 Google searches per month, indicating that many people are still confused about the subject. So, how many people actually understand certain mortgage-related terms, and how many are left scratching their heads?
To find out, the mortgage team at Compare the Market conducted a survey, exploring which mortgage-related terms are the most confusing for people in the UK, plus how confident people feel about their mortgage knowledge.
‘LPA’ is the most confusing term, as only 7% of people in the UK know what it means
The most understood mortgage-related term is ‘fixed-rate mortgage’, however just over half (52%) of all respondents say they know its definition. A fixed-rate mortgage is a type of mortgage where the interest rate on your mortgage stays the same, usually up to five years, but the length of time depends on your initial agreement.
The term ‘stamp duty’ follows, with 47% understanding the term, which is the tax you must pay when you buy a property in the UK. ‘Mortgage term’, simply meaning the length of the mortgage itself, follows in third (46%).
At the other end of the scale, the least understood term is ‘LPA’, also known as a ‘lasting power of attorney’, which relates to the management of someone’s property and financial affairs, including a mortgage, if the person no longer has the capacity to manage their finances themselves. Only 7% of people understood this term. ‘SVR’ follows, meaning a ‘standard variable rate mortgage’ which is an interest rate set by your lender, with just 12%. ‘Capital on mortgage’ rounds off the top three (20%), which is a mortgage that is paid for in regular monthly payments over the mortgage term.
| The most understood mortgage-related terms | The least understood mortgage-related terms | ||||
| Rank | Mortgage-related term | Percentage of people who understand this term | Rank | Mortgage-related term | Percentage of people who understand this term |
| 1 | Fixed-rate mortgage | 52% | 1 | LPA | 7% |
| 2 | Stamp duty | 47% | 2 | SVR | 12% |
| 3 | Mortgage term | 46% | 3 | Capital on mortgage | 20% |
| 4 | Interest-only mortgage | 45% | 4 | Loan-to-value ratio | 22% |
| 5 | Property chain | 42% | 5 | Booking fee | 28% |
16% of people in the UK agree that although they have a mortgage, they still don’t understand them
Despite having a mortgage, over one in six (16%) people admit to still not fully understanding the process and the different terminology involved.
Mortgage knowledge is seemingly better among those who don’t have a mortgage, with less than one in 10 (7%) of those who own a home outright saying they don’t understand, and only 12% of solo renters.
People from Norwich are the least confident in their mortgage-knowledge
| Rank | City | Percentage of people that don’t fully understand mortgages even though they have one |
| 1 | Norwich | 23% |
| 2 | Newcastle | 21% |
| 3 | London | 19% |
| 4 | Leeds | 18% |
| 4= | Brighton | 18% |
| 5 | Manchester | 17% |
When exploring where in the UK has the lowest understanding of the mortgage process and terminology, Norwich came out with the least knowledge, with nearly a quarter of residents (23%) admitting they don’t fully understand mortgages even though they have one. Following in second place is Newcastle with 21% saying the same, and London rounds out the bottom three, with 19% of people saying this.
Nearly three-quarters (71%) of people in the UK believe that the mortgage process should be taught in schools
When asked when respondents believe people should start learning about the mortgage process, a staggering 71% of respondents said they think the mortgage process should be explained at school. Nearly one-third (62%) of those in the Gen-Z age group (16-26) say they agree with this, and an even higher 76% of the silent generation, those aged 78+, believe in educating about mortgages in schools.
The mortgage team at Compare the Market shares why understanding mortgages is so important
Understanding mortgages is really important because it not only empowers homebuyers to make informed decisions but ensures they select the loan terms that best align with their financial goals. With the right knowledge, buyers can avoid common pitfalls, secure the best interest rates, and manage their long-term financial commitments.
Resources like mortgage calculators, financial advisors and internet resources can help. Using these tools and professional advice can significantly improve a person’s ability to achieve and sustain homeownership.
