One in seven unaware of what mortgage deal they have
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One in seven - 15% - of mortgage holders don’t know what type of interest rate they are paying on their mortgage and whether it is a fixed, standard variable, tracker or discounted rate.
Furthermore, three-quarters - 74% - of mortgage holders don’t know how an interest rate rise of 1% point could affect their monthly outgoings, according to research published today by the Consumer Financial Education Body.
CFEB is an independent body, established by the Financial Services Authority as required by the Financial Services and Markets Act 2000.
Its findings also reveal that over half, 51% of mortgage holders believe interest rates will change in the next nine months.
Some 14 % of mortgage holders - two million, say they do not know what they would cut back on if their mortgage payments increased by £200 per month.
Furthermore, 54% of mortgage holders with a deal have no plans in place to review their mortgage situation, or will leave it to the last minute and 15% of mortgage holders with a deal do not know when their mortgage deal expires.
CFEB is today launching its first campaign - Stay on top of your mortgage – providing homeowners with help and advice to be prepared for when interest rates - or their personal circumstances - change.
Tony Hobman, chief executive of the Consumer Financial Education Body, says: “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.”
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Readers' comments (7)
Anonymous | 7 Jul 2010 1:11 pm
This is no great surprise given that these types of clients will nod and sign where told to by their banks 'advisers' who have pushed a non advised or researched mortgage deal during a client's lunch hour. Until people realise good advice is only available from a mortgage broker this situation will continue to grow.
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Anonymous | 7 Jul 2010 2:08 pm
There is no indication that these people obtained their mortgage direct from a bank. I expect the same results if direct or via a mortgage broker. Most people are only interested in what they are paying - how it is calculated or reference to BBR or SVR etc is of little interest.
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joe | 7 Jul 2010 4:22 pm
Whilst I will not disagree with either above comments, the reality is that people dont know these facts because they have not come around to think about them & simply dont understand it as they are so much complicated. No point pulling the table cloth towards you when the simple facts are that finance has got rediculously complicated for average joe public to understand. Also, the government and regulating bodies who have been too busy showing off their might have missed out on the most basic principal function - to promote understanding of finance to public. As this article suggests, they failed miserably. So lets focus on who really should be doing their jobs and kick their butts hard. At this current rate, they might as well start selling financial products in chinese since public is not going to understand it anyway - why the adventurism when clearly our system in UK is simply a disaster. Most developed country with the most damaged egg basket, lets not blame the massive gap in the basket, but blame us for not improvising in the first place.
Hope new government could turn things totally around, afterall, it was Lady Maggie who started us on the roads of ruins in privatisation 25 years ago - hope baby cameron and clegg can really suprise us all and put us back on world map, where we really should belong.
Common, sort our financial system out, get a morality check
Schools need to teach kids about finance, more public finance workshops, more accessible simple guides. Also, MORE SIMPLE FINANCIAL PRODUCTS!
Get rid of the jargons, define material in simple english and not financial chinese
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Anonymous | 7 Jul 2010 5:18 pm
This is hardly surprising in a nation weaned on soaps and reality TV shows. Our average IQ must be dropping by the year...
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Ancient Wisom...is a mortgage broker in N3. | 7 Jul 2010 5:42 pm
..most people only care what the monthly payment is each month..and what the mortgage payments would be after an initial period.
FACT.
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bob gore | 7 Jul 2010 6:57 pm
Not sure how Maggie Thatcher gets blamed but never mind !!As far as I am aware every prospective mortgagor gets a written offer and maybe they could read it and if they don't understand part of it ask their Broker or provider,or their Solictor or their parents..the list goes on and on.
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bob g | 7 Jul 2010 10:25 pm
i agree with joe, and if you want to see a great example of the kind of practice that leads to over complication and misunderstanding look at the charcol news piece in stratgegy where they are now selling rate hedging policies to borrowers. shocking
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