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A consumer’s view

The almost wilful refusal of the vast majority of the public to learn about and take an interest in their financial aff-airs must be a continuing cause for concern for IFAs who have to advise them, and the regulator, charged with the unenviable task of educating the general public about money matters.

Nowhere is it more mystifying than in the area of house purchase, something that seven out of 10 of us eventually embark upon, even if as first-time buyers we now have to wait a bit longer before being able to afford a property.

Recent research by Abbey among first-time homebuyers is enough to drive advisers to despair. It reveals that nearly two-thirds of FTBs do not shop around for even a good mortgage deal, let alone the best deal, with 63 per cent admitting that they took the first homeloan offered.

This is disastrous for these homebuyers, who can ill-afford to pay over the odds for their borrowing. The difference between the best discounted mortgage deal at 3.99 per cent and a straight variable rate loan at anything up to 6.99 per cent or more on a typical FTB mortgage of 80,000 is 2,400 a year. These homebuyers are simply throwing money down the drain.

This is a little more understandable when you realise that 35 per cent feel under pressure from an estate agent, with 24 per cent saying their estate agent told them to act quickly or risk losing the property. But it does not say much for estate agents. On the other hand, it does not say much for mortgage brokers and IFAs either, who have clearly failed to get their message across.

Apathy about personal finances is endemic and difficult to overcome and there is little evidence that each upcoming generation is any better informed than the last. Indeed, what the Abbey survey reveals is that 17 per cent of FTBs took advice from their own family – which clearly was not up to much since the majority took the first mortgage offered.

Hardly a day goes by with-out some new survey revealing that savers have no idea how much interest they are earning on their investment accounts, credit card holders are ignorant of how fast unpaid interest at 23 per cent will compound and the vast majority of the population seems stunned into inaction about anything to do with money and incapable of doing simple mental arithmetic.

Yet these financially ill-educated members of the public can work out how to place the most complicated bets on a string of horses – and calculate their winnings.

Many of the younger ones have found their way through the maze of social security benefits and there is hardly a person in the land who does not know how to fill in a lottery or pools coupon.

Perhaps what we need is for the Government and the financial services industry to appeal to this aspect of the public’s sensibilities. Instead of forecasting doom and poverty in old age if we do not save, maybe the Government should introduce an element of gambling into saving and finances generally.

Justin Modray of Bestinvest made a light-hearted suggestion that could be worth trying. He pointed out that while the Government is exhorting us all to save more, it is busily passing the Gambling Bill, giving gambling the biggest boost for years.

Rather than trying to turn Blackpool into Las Vegas, the Government might better spend their time developing a prize-draw pension so that if we do become a nation of avid gamblers, at least some money will find its way towards plugging the savings gap, says a critical Modray.

A pension lottery is not such a bad idea. Saving for retirement is a big gamble anyway. If the Government gave away a 1m pension fund every week, drawn from people who were saving, say, a minimum of 50 a month in a pension scheme, there is no doubt that this would provide a substantial incentive to save.

Perhaps we need a more positive attitude towards money to get the desired results. It was the giveaway privatisations which made people interested in buying shares, not fund managers telling us of their brilliant performance.

What about mortgage brokers as a group organising a free 100,000 homeloan draw every month for homebuyers using their services? At a total cost of 1.2m a year, it is peanuts if the lenders could be persuaded to put up the money.


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