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Borrowers 'do not understand rate differences'
Mon 26 Nov 2007 4pm
Many British homeowners lack an understanding of how changes to interest rates can make a difference to their mortgage payments, new research has indicated.A survey by Nationwide Building Society found that 75 per cent of UK people do not fully appreciate the major impact a one per cent difference can have on the overall cost of a mortgage.
When asked how much the difference could be worth on a £120,000 mortgage with an interest rate of 5.6 per cent, compared to a product with a rate of 6.6 per cent, only 25 per cent correctly stated that it could be as much as £4,000.
"As our research shows, most people don't understand the impact that just a one per cent difference can make, meaning they could be wasting thousands of pounds," said Matthew Carter, divisional director for mortgages at Nationwide.
"We therefore urge borrowers to make time to shop around and compare the total costs over the life of a deal before making a final decision," he added.
Last week, the Council of Mortgage Lenders predicted a "testing time" ahead for the UK property market and said that people with adverse credit would encounter greater difficulties in obtaining a mortgage.
