Seven out of 10 consumers do not know how much interest they will pay a lender over the course of their mortgage. Stock image

New research has found most of us are clueless when it comes to how our mortgages work.

The survey found home owners and those planning to buy are confused about interest rates and the impact of taking out a home loan over a longer period and are unclear about cash-back offers.

And low levels of mortgage literacy were most prevalent among those in their 20s and 30s.

Seven out of 10 consumers do not know how much interest they will pay a lender over the course of their mortgage, according to the research commissioned by Mortgage Brain Ireland, a provider of mortgage software for brokers and lenders and an app for consumers.

Most people were unaware that more interest would be paid if a mortgage is taken out over 35 years compared with one taken out over a 25-year period, the survey of 1,000 adults by Coyne Research found.

The largest knowledge gap is among those aged between 18 and 35 who said they were likely to take out a mortgage over the next year.

All those surveyed were asked if they would be better off with a mortgage rate of 5pc with cash-back paid by their bank when they draw down the loan, compared with a rate of 4.75pc with no cash back.

Seven out of 10 adults correctly answered that the lower interest rate with no cash back was the best option.

But 44pc of those who intend to get a mortgage in the next year got the answer wrong.

Bank of Ireland has had huge success offering 2pc of the value of the mortgage drawn down back in cash, even though its new buyer rates are higher than those offered by AIB. This has prompted Permanent TSB to offer cash back, with ESB set to introduce the same incentive.

Almost a quarter of those in the 18 to 24 age bracket mistakenly thought extending a mortgage over 35 years, rather than 25 years, would have no impact on the interest paid.

Mortgage Brain managing director Michael Quinn said the research has highlighted "surprisingly low levels of mortgage literacy" in this country. More education was needed, he said.

Irish Independent