Posted on 1 September 2014 by
A classic example highlighting why one should treat “research” by providers (and not just in the financial services world) with caution was amply demonstrated by the two lead stories this morning on a financial web site, with these stories completely contradicting each another.
The headline for the first story is “Half of homeowners would struggle with 1% rate rise,” whereas the second story was headlined “51% of homeowners unconcerned about base rate rise.”
The first story not only falls massively short of passing the sense test but it is fortunate for Equifax, who made these claims, that its marketing material doesn’t have to meet the FCA test of being “clear, fair and not misleading.”
Equifax also said that “When asked how much a potential rise of 1% would affect their monthly mortgage repayment, 40% of homeowners did not know.”
It is worrying that 40% of homeowners did not know how much a rate rise of 1% would affect their monthly payments. Presumably, however, the 40% who did not know how much a 1% rate rise would cost would as a consequence also not be able to say whether or not they would struggle with a 1% rate rise.
Add to that the fact that nearly half of all homeowners (note the claim relates to 51% of homeowners, not just those with a mortgage) own their property unencumbered and of those with a mortgage around 30% are currently on a fixed rate, although a majority of these are likely to have less than 2 years left on their fix and so some might be worried about a rate rise, and the suggestion that “half of homeowners would struggle with 1% rate rise” is clearly patent nonsense.
Based on the above, I hope Equifax is not going to be invited to help with the financial numeracy programme that primary and secondary schools are required to introduce into their timetables from this term. An understanding of percentages should be one of the basic skills.
The second headline - 51% of homeowners unconcerned about base rate rise - based on a survey from Halifax, is more plausible but Halifax has also fallen into the trap of referring in its press release headline to 51% of homeowners, when, as confirmed in its methodology notes, it actually means 51% of homeowners with a mortgage.
The question Ipsos Mori asked for Halifax was “Thinking about the next 12 months, to what extent, if at all, are you concerned about any rises in interest rates affecting you (sic) mortgage payments?”
Although many household budgets have come under significant pressure over the last few years with the real terms cut in income, mortgage costs have fallen dramatically over the same period and so those with a mortgage should on average have come under less financial pressure than tenants, who at best have seen no reduction in their rent and in many cases some increase.
A large majority of people with a mortgage will either have taken it out prior to 2008, and hence initially paid a rate well in excess of those available today, or had their payments stress tested at around 7%, since most mortgages have been stress tested at around this rate since well before the MMR was implemented in April.
Therefore, as Halifax only asked about the impact of any rate rises over the next 12 months, which hardly anyone is forecasting will exceed 1%, the most surprising thing about this survey was that as many as 41% (presumably 8% were don’t knows) of borrowers were concerned about a rate rise, and furthermore that 43% of this 41% were on a fixed rate.
How those included in the survey answered the question will have depended on how they interpreted the word “concerned.” Even if they were not worried about meeting their mortgage payments but thought it might be necessary to cut back on some luxuries I guess the right answer to the question was still that they were “concerned!”
Meanwhile, in a fairly useless piece of research published today, but one which is nevertheless very clever because it facilitates a brilliant headline, TSB claims that “while women try on 1,340 pairs of shoes in their adult lifetime before committing to buying 536 pairs, they only change their bank account once, if at all.”
Whenever polling is used as the basis for a press release to promote a product it is always worth being cynical. If there is a genuine desire to obtain information about potential customers and markets there is an obvious incentive for any polling to be robust.
But if the main objective is to provide a hook for a press release it is very easy to manipulate the results. Perhaps the most unreliable type of poll is one based on an unscientific sample, such as a web site inviting anyone to respond. This type of poll can still be useful, but needs to be interpreted properly by recognising that the sample is not scientific. Nevertheless it can still be a good reflection of the views of a particular segment of the population.
The more dangerous polls are those which purport to be scientific but aren’t. If the intention is to steer those questioned into giving the “right” answer this can easily be achieved by simply phrasing questions in a certain way. Likewise, asking some apparently unrelated questions before the key question can influence thought processes and thus change the way people respond to the key question.
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