Homeowners clueless about mortgage interest rates

Three quarters of mortgage holders do not know how an interest rate rise would affect their monthly payments.

Markets

Other markets

Market Data Notice

More market charts

by Victoria Bischoff on Jul 07, 2010 at 11:21

Follow VBischoff

Three quarters of homeowners do not know how an interest rate rise of 1% would affect the cost of their mortgage, research revealed today.

Meanwhile, a worrying one in seven homeowners do not know if the interest rate they are paying on their mortgage is fixed or variable, according to the Consumer Financial Education Body (CFEB). And a further 15% do not know when their mortgage deal expires.

What’s more, despite over half of homeowners expecting interest rates to change in the next nine months, 54% have no plans in place to review their mortgage situation, or will leave it to the last minute.

Tony Hobman, chief executive of CFEB, said: ‘Interest rates have been at record lows for some while now. Although there is uncertainty about when this will change, it is clear from our research that many people with mortgages haven’t thought about what it would mean for their monthly payments, or where they would find the extra money in their household budget if their mortgage rate was to go up’

In its new campaign ‘Stay on top of your mortgage’ CFEB offers homeowners help and advice about interest rates. CFEB advises consumers to:

Keyfacts. Dig out the ‘Keyfacts’ paperwork you received from your lender when you took out your mortgage. This shows your interest rate deal and when it ends.
Mortgage calculator. Use the Moneymadeclear mortgage calculator to work out what a rise in interest rates will mean for your monthly payments.
Mortgage toolkit. Use the ‘mortgage toolkit’ to help give your finances a health check so you can understand your options and plan ahead.

Email a friend

Email me when someone comments on this article Print

6 comments so far. Why not have your say?

I wonder if such people should have been given a mortgage in the first place ;-)

report this

Ian, I've been in financial services for 38 years and the results don't surprise me at all. Lots of sensible, intelligent people go blank when you try to explain details on mortgage deals so the fact that they don't remember or more strangely still don't keep all their documentation on their mortgage deal is probably the norm rather than the exception.

report this

And what is also bad and possibly a cause is that many people in the UK take pride in the fact that they can't do any maths.

report this

Not really a surprise on my experience. Saying that, some advisers can be clueless about the impact on changes to interest rates despite having the information readily available.

report this

The term is debtors Victoria. They don't own their home do they?

report this

James Holloway

Jul 08, 2010 at 22:21

I don’t believe these figures at all. Yet another statistic plucked out of the air. My friends and I all in our early thirties constantly worry about what is going on in the economy and monitor the situation. But when interest rates can be changed so rapidly every month, what hope have you got but to live with your decisions when taking out a mortgage. The MPC should not be reviewing interest rates every month and dictating changes so rapidly unless there is another crisis, this way people like myself can successfully budget for the year without worrying too much about what impact another half or one percent is going to make to outgoings.

report this

Please sign in here or register here to comment. It is free to register and only takes a minute or two.