Consumers dont understand the impact of different mortgage rates

Published: November 26, 2007

A new report has indicated that the majority of consumers in the UK could be ignoring the best remortage deals because they do not understand the impact of different interest rates.

Research from Nationwide Building Society found that 75 per cent of consumers did not know what the monetary value a one per cent difference in mortgage rates could make.

In fact, the lender showed a one per cent difference can mean savings of £4,000 on a five year fixed-rate £120,000 mortgage.

Just 25 per cent of the people questioned realised the different interest rate made such a sizeable difference. In particular, it was found that young people did not know how the interest rate affected their costs.

"People's lives are busier than ever in the run up to the festive season and, as a result, they may be less inclined to shop around for the best deal," commented Nationwide's Matthew Carter.

"The temptation may be to take a slightly higher rate as an easier, less hassle option.

"We therefore urge borrowers to make time to shop around and compare the total costs over the life of a deal before making a final decision."