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, according to a YouGov survey commissioned by insurance provider Paymentshield.
This drops to 32% of 35 to 44-year olds, with this falling further again to 25% among those aged 45-54.
For the first time in a decade, the average age for a UK first-time buyer rose this year from 30 to 31, with the average cost of a first home in the UK at £196,223 according to research from Savills.
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. Paymentshield said 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: 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, said: “The finding that 25 to 34-year olds are nearly seven times more likely to say they would prefer price comparison sites to seeking 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.
“Even beyond the end of Stamp Duty holiday, the first-time buyer 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: first-time buyers also have more overall needs in terms of General Insurance.
“By targeting first-time buyers 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.”