Most houseowners unaware of impact of interest rate rise

Three-quarters of home owners do not know what impact an interest rate rise would have on them, a survey has indicated.

 Published: 12:30PM BST 07 Jul 2010

Around 74pc of people with a mortgage admitted they did not know how a 1 percentage point rise in the Bank of England base rate would affect their monthly outgoings, according to the newly formed Consumer Financial Education Body (CFEB).

More worryingly, 15pc of people do not even know what type of mortgage they have, such as whether it is a fixed-rate deal, which would make them unaffected by an interest rate rise, or whether it is a variable-rate one, meaning their monthly payments would go up.

A further 15pc also do not know when their current mortgage deal comes to an end. The lack of awareness comes despite the fact that 51pc of people with a mortgage expect interest rates to rise during the coming nine months. 

Just over half of people said they had no plans to review their mortgage, or would leave doing so until just before their existing deal expired, while 14pc admitted they did not know what they would cut back on if their mortgage repayments rose by £200 a month. 

Tony Hobman, chief executive of the 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. 

"Lack of time means many of us often put off reviewing our finances, but it doesn't have to be time consuming to keep on top of your money matters." 

The organisation is urging people to stay on top of their mortgage, and is offering help and guidance on how to prepare for when interest rates do rise. 

It advises people to look at the Keyfacts document they were given when they took out their mortgage, as this shows what their current interest rate is and when their deal expires. 

The CFEB has set up a mortgage calculator so that people can see what impact interest rate rises would have on their monthly repayments, while it also provides impartial mortgage comparison tables to help people find the best deal. Its mortgage toolkit can be found at www.moneymadeclear.org.uk/mortgages

 

The body was set up in April by the Financial Services Authority to take over responsibility for consumer financial education. 

http://www.telegraph.co.uk/finance/personalfinance/borrowing/mortgages/7876910/Most-home-owners-unaware-of-impact-of-interest-rate-rise.html