Brits Fail To Understand Mortgage Loan Rates

Wed, 28 Nov 2007

Nearly a quarter of UK homebuyers do not understand the difference which is made by a one per cent change in mortgage loan rates, according to a new study by Nationwide Building Society .

The Nationwide research found that only 25 per cent of respondents were able to correctly determine that a one per cent difference in mortgage rates on a £120,000 five-year fixed-rate deal could be worth £4,000.

Around 23 per cent were found to have no clue at all in regard to the monetary value of a one per cent difference in interest rates, while a further 28 per cent of respondents thought the difference would be between £500 and £2,000.

Matthew Carter, Nationwide’s divisional director for mortgages, explained: "People’s lives are busier than ever in the run up to the festive season and, as a result, they may be less inclined to shop around for the best deal ."

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

The research also revealed men to be more mortgage savvy than their female counterparts, with 33 per cent of men correctly identifying how much a one per cent difference would make to repayments, compared to 18 per cent of women .

Age also appeared to be a significsant factor, with as many as 31 per cent of those aged 55-64 able to calculate the correct difference, compared to just 16 per cent of people aged 18-24 years olds.

"We urge borrowers to make time to shop around and compare the total costs over the life of a deal before making a final decision," Carter continued.

"After all, a £4,000 plus saving on a five year deal for a couple of hours of work is a pretty good return."
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