Of course, you can "securely encrypt" things, and it doesn't matter if this is a phone number. But you're probably referring to the fact that the phone number is used as an identifier and is thus hashed and not encrypted. Nevertheless, it makes sense to call it "encryption" when describing the app to non-tech people and give the technical terms (i.e. hashing) in brackets etc.
I'm not sure, but I suspect there's a fairly good word for such case: "mangled"
Do you really think so? Technical descriptions always differ from "mainstream" descriptions for the end-user.
I am not an expert but it seems to me that hashing of phone numbers is relatively useless here because there is a relatively small search space of potential phone numbers so I can just brute force check, right?
Well, the search space is certainly small and thus brute force becomes much easier. But I wouldn't really call this "useless". You can, of course, apply your hashing repeatedly too make brute force slower.