Borrowers confused over mortgage rate savings

Latest research from Nationwide Building Society has revealed that 75% of UK adults do not understand the monetary value a 1% difference in mortgage rates.

Participants in the survey were given details of two five year mortgage products to compare: a £120,000 mortgage with an interest rate at 5.6% and the same mortgage with a rate of 6.6%

Only 25% of respondents correctly identified that the difference could be £4,000.

The largest group (28%) said they thought the difference would be between £500 and £2,000.

Twenty-three per cent admitted they had no idea at all what the difference would be.

The research also showed a gender advantage, with 33% of men answering correctly, compared with 18% of women.

Age also played a part, with 31% of those aged 55 to 64 opting for the true value compared with just 16% of those aged 18 to 24.

Adding a regional perspective, 28% of respondents in the South-East, Midlands and Scotland knew the correct difference, compared with 19% of respondents in Wales and the South West.

Matthew Carter, Nationwide Building Society’s divisional director for mortgages, has observed that: “People’s lives are busier than ever … the temptation may be to take a slightly higher rate as an easier, less hassle option … most people don’t understand the impact that just a 1% difference can make, meaning they could be wasting thousands of pounds.”

He is urging borrowers to make time to shop around and compare the total costs over the life of a mortgage, before making a final decision.

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