Three quarters of homeowners do not understanding rate changes

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by Kay Murchie

Research from Nationwide has established that 75% of Britons do not understand the difference between a 5-year fixed-rate mortgage with a rate of 5.6% and one with a rate of 6.6%.

In the current financial climate, finding the right mortgage deal is vital for first-time buyers but the research shows that many are unaware of just how much money they can save on a lower mortgage rate.

The study asked homeowners to work out the difference in cost between a 2-year fixed £120,000 mortgage charged at 5.6% interest, and those charged at 6.6%. Just a quarter of those surveyed correctly worked out that the difference could be as much as £4,000, Nationwide has said.

Matthew Carter of Nationwide said as our research shows, most people don’t understand the impact that just a 1% difference can make, meaning they could be wasting thousands of pounds. Nationwide urges borrowers to shop around and compare costs before making a final decision.

The research comes just a few weeks after mform.co.uk discovered that 29% of borrowers have been on the same mortgage deal for at least a decade while 50% have been on the same deal for 5 years.