Online mortgage broker and lender Habito, the pioneering has published what it is hailing as “the industry’s first ever jargon-free mortgage terms & conditions.
The document was created in partnership with consumer group Fairer Finance with the aim of stripping out all unnecessary and confusing financial language to make it the most accessible and readable financial document in the mortgage market.
The document has been certified by Fairer Finance as “Clear & Simple” – a mark “designed to reward providers whose documents stand above the rest in terms of clear design and simple language”. According to the Automated Readability Index (ARI) – the UK’s test designed to assess the understandability of a text – Habito’s new mortgage T&Cs have achieved a score of 6.8, surpassing the target of ‘8 or under’ for financial documents.
Due to industry jargon, complex legalese and overly long sentences, it’s not uncommon for mortgage Terms & Conditions to have a reading age of 19 – Habito’s new mortgage Ts & Cs have a reading age of just 11.
Last year, Habito worked with Dr Peter Backus, an economist at Manchester University and the linguistics team at Nottingham University to examine the correlation between homeowners with a mortgage and industry jargon. The results showed that 55% of homeowners with a mortgage are paying up to £294 more than they need to each month, equating to more than £3,500 per year and £15.5 billion collectively across the UK. Additional research shows that jargon plays a part in this with 58% of homeowners saying they are put off switching to a better deal by over-complicated jargon.
66% of mortgage holders admitted to not reading their mortgage T&Cs.
Daniel Hegarty, founder and CEO of Habito, said: “Since we made the link between financial jargon and people paying too much for their mortgages, we have been on a mission to make mortgages easier. We decided to tackle T&Cs because they form a large part of what is, for most people, the biggest financial commitment they will ever make.
“Overwhelmingly, nine in 10 people we surveyed called for the language used in financial contracts to be simplified and nearly all (95%) said the government should regulate to force providers to make contracts and T&Cs easier to understand. We’ve listened and acted. There is a lot more to be done but this is a huge step in the right direction.”
James Daley, managing director of Fairer Finance, added: “We analyse hundreds of terms and conditions documents every year, and mortgage T&Cs tend to be the worst of them all. It’s an area that is littered with jargon, leaving most consumers with no chance of understanding their mortgage T&Cs, even though it’s probably the most important contract they’ll ever sign.
“We’ve been impressed by Habito’s commitment to creating something that consumers can actually make sense of. Our Clear & Simple Mark sets a high bar, which requires companies not just to keep their documents free of jargon and lengthy sentences, but also looks at important design elements such as font size and number of words on the page. Where complex words can’t be replaced, we insist that at the very least, they are accompanied with a plain English explanation.
“Habito is the first lender to achieve the mark in the mortgage market, which is no mean feat. Now the gauntlet has been laid down, we hope some of the more established lenders see that it is possible to create documents that are both legally watertight and easy for customers to understand.”