Mortgage holders 'do not understand' rate change impact

British borrowers are seemingly oblivious to the impact of rate changes on their mortgage costs, a new survey shows.

Nationwide Building Society research shows three-quarters of respondents do not understand what monetary impact a one per cent change in mortgage rates has.

According to the lender, such a rate change, if applied to a five-year fixed-rate mortgage, could mean a difference of more than £4,000.

The research also showed that men are more likely to correctly estimate the impact of such a mortgage rate change, while borrowers aged between 55 and 64 were more savvy than those in the 18 to 24 age bracket.

Busy lives mean that people are less likely to shop around for the best deal on mortgages, according to Nationwide divisional director for mortgages Matthew Carter.

"The temptation may be to take a slightly higher rate as an easier, less-hassle option," he said.

However, borrowers who do this could be wasting thousands, Mr Carter warned, adding that they should not only compare deals but also consider the "total costs over the life of a deal before making a final decision".

Earlier this month, price comparison site moneysupermarket.com warned consumers that those with long-term mortgage deals could face penalty charges of thousands of pounds if they need to exit their deal after a short period.

back