One in seven mortgage holders do not know what product they're on
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Damning research from the Consu-mer Financial Education Body last week revealed that one in seven borrowers don’t know what kind of mortgage they have.
The CFEB is an independent organisation established by the Financial Services Authority, as required by the Financial Services and Markets Act 2000.
It found that 15% of mortgage holders don’t know what type of interest rate they are paying on their mortgage, or whether it is a fixed, standard variable, tracker or discounted deal.
Furthermore, three-quarters do not know how an interest rate rise of 1% could affect their monthly outgoings.
The CFEB’s findings also reveal that over half of mortgage holders believe interest rates will change in the next nine months. And around two million - 14 % - say they don’t know what they would cut back on if their mortgage payments were to increase by £200 per month.
Around 54% of mortgage holders have no plans to review their mortgage situation or say they will leave this to the last minute, while 15% do not know when their mortgage deal expires.
Tony Hobman, chief executive of the CFEB, says: “It’s clear from our research that many consumers with mortgages have not thought about what it would mean for their regular repayments or where they would find the extra money in their household budget if their mortgage rate was to go up.”
Kevin Friend, strategic partner-ships director at Mortgages.co.uk, says the results of this research are not particularly surprising but they highlight some concerns.
He says: “In the past year we have seen a significant rise in the number of consumers on our website using the search term ’mortgage rates’. Our partners who offer regulated advice to clients often discuss the issue of payment shock with them.
“But it seems that many mortgages may have been mis-sold if consumers were not advised about the effect of rate changes.”
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