By Daniel Hegarty, CEO and Founder of Habito
From today, we’re making a promise to rid ourselves of bad language and be a ‘free from’ mortgage broker.
It’s a term most of us have heard in the supermarket aisles, referring to food that has cut out allergens. For us, it means getting rid of other things that bring consumers out in hives: confusing industry jargon, complicated language, and endless acronyms. ‘Free From’ for Habito, means always writing in plain English, being clear and accessible in our advice and using terms that everyone understands, or explaining the ones they don’t, much better.
Communicating clearly means that all of us can make informed decisions and do what is best for us financially. Our research has shown the harm that badly worded contracts can do. We’ll be campaigning to simplify the outdated language used in mortgages so that everybody can understand every aspect of what they’re signing up for.
Why now? Habito was founded just over two years ago with a guiding principle to make the process of getting a mortgage less difficult.
One thing has become clear since we started and that is that millions of UK homeowners actively fear their mortgage. The process of getting one, or switching to a better one, seems so complicated, scary and confusing, that many would rather avoid it altogether.
Why are people afraid of mortgages? People are disengaged by the use of over-complicated language and industry jargon. SVR, fixed-term rates, introductory period, interest-only, capital repayment… the list goes on. No-one learns this in school. These aren’t words or phrases we use at any other time. They are unfamiliar and unapproachable. And it’s only natural to fear what we don’t know – it leaves us feeling vulnerable.
Complicated terms, industry legalese and endless jargon mean that many homeowners aren’t able to understand what they’re signing up to. We found that nearly half of homeowners only read a quarter or less of their terms and conditions of their mortgage before signing on the dotted line.
Not understanding what you are signing up to is stressful. More than a third of people say they have had sleepless nights or been distracted throughout the day because of the stress of needing to go through a financial contract.
More than headaches and insomnia, this costs homeowners dearly. More than half of homeowners say they think they’ve ended up paying for something they shouldn’t have because the language was too complicated, and they signed up for something they didn’t fully understand.
On top of this, Dr. Peter Backus, Senior Economics Lecturer at the University of Manchester, estimates that 55% of homeowners could be wasting nearly £300 a month, from not switching their mortgage.
So what are we actually doing? Earlier this year, we commissioned the University of Nottingham’s Linguistic Department (LiPP) to do a linguistic analysis of Habito.com. They did a full readability test to make sure our words are easy to understand and as a result, we’ve made some major changes.
We can only do so much, though, on our own. Buying a house is a huge financial commitment, which is why it’s also a major legal commitment between consumers and lenders. Habito is not a lender, so we can’t rewrite everyone else’s terms and conditions. But as the middleman, or as we like to think of it, the interpreter, we want to do better at translating it all.
Fundamentally, this comes down to us wanting to make people feel empowered when they make the biggest financial commitment of their lives. We don’t think you should need a degree to be able to read a financial contract.
Homeowners agree. 95% of people say that the Government should regulate to make the language in financial contracts easier to understand. So, now that we’re on the path to getting our own house in order, we’re going to campaign for much bigger, industry-wide, changes too.
Today’s announcement is just the beginning.