View more on these topics

Majority of UK finance illiterate, reveals Mortgages Direct

Nearly one in four people think that a tracker mortgage tracks your salary increase, a poll commissioned by Mortgages Direct has revealed.

The company says the research reveals that the British public are surprisingly ignorant of basic mortgage issues which could lead to homeowners paying well above the odds.

And nearly a year on since Mortgage Day it says only 19% of the British public know the name of the Financial Services Authority, with 20% of respondents thinking that the acronym stands for Funds Savings Account.

However the general public fared slightly better on their knowledge of another basic financial acronym with 60% knowing that APR stands for annual percentage rate.

There are a plethora of different types of mortgages available to borrowers, however an alarming low number of the general public understand their options, with only 35% of the general public knowing that a tracker mortgage tracks the Bank of England’s base rate.

Nearly a quarter of the general public (24%) think that a tracker mortgage tracks your salary rise and 31% think that a tracker mortgage tracks rates of inflation.

With the average property price soaring by 46% since 2001, interest rates are hugely significant for the personal wealth of borrowers.

However despite interest rates recently decreasing to 4.5% in August 2005, only 29% of the general public know the current interest rates level.

A small percentage of the general public understand the implication the base rates level has on the setting of mortgage rates, with 33% of people thinking that the stock market influences the setting of mortgages and less than half realising the importance of the Bank of England base rate on their mortgage rates.

Peter Gladdy, director of Mortgages Direct, says: “The interest rate level plays a crucial part in determining homeowners personal wealth.

“Borrowers, particularly those that have not opted for fixed rate deals, should ensure they are informed of changes in the base rates and consequently the rates set by their lender.

“With borrowers not keeping their eye on the ball they could find they are paying way above the odds on their current mortgage. As circumstances change there may well be better deals available.

“It is concerning that the general public are not on top of basic personal finance issues.

“Buying a house and signing up to a mortgage is possibly the largest financial commitment we make in our lives and yet the sheer number of people who do not understand the basic terms and processes is very worrying.

“All homeowners should ensure that they are fully informed not only prior to purchasing a property but throughout their period of repaying a mortgage.

“However help is at hand as there are a large number of highly trained financial advisors who can help explain the basic details as well as the more complex issues and keep borrowers abreast of any relevant changes.”

Recommended

A&L defends cautious B2L strategy

Alliance & Leicester has hit back at claims that its entry into the buy-to-let market is belated and shows a lack of commitment to the sector. A&L revealed in early August that it plans to enter the sector next year after feedback from intermediaries suggested they do so, but has come under fire from HBOS […]

Rees takes M2000 PR role

Mortgage 2000 has appointed Lynne Rees as head of corporate communications. The role will involve PR for all areas of the Mortgage 2000 proposition. Rees has been with the company for over six years and will continue to report directly to managing director Sean Hornsby.

Rightmove reports drop in house prices

First-time buyers are encouraged by the drop in house prices according to the UKs leading property website, Rightmove.Its September House Price Index reveals that average asking prices fell for the third consecutive month by 0.4% (845) and, overall, by 3,200 over past three months. The average property now costs 195,407. Housing affordability has improved due […]

Portman reveals 2005 interim results

Portman has issued its interim results, revealing a strong start to the year. The results show total assets up 7% to 16.5bn in the first half of the year, and total profit before tax a record 39.3m. The Society reports new residential mortgage lending up 37% on the second half of 2004, and management expenses […]

How to balance bottom-up with top-down research in constructing multi-asset credit portfolios

In this short video, Azhar Hussain, head of global high yield at Royal London Asset Management, explains how his team balance bottom-up with top-down research in constructing multi-asset credit portfolios. Watch the video in full The value of investments and the income from them is not guaranteed and may go down as well as up […]

Newsletter

News and expert analysis straight to your inbox

Sign up