A research from Nationwide Building Society revealed that 75% of people in the UK don't understand the monetary value a 1% difference in mortgage rates can make.
A 1% difference in rates on a five year fixed rate mortgage deal could be worth over GBP4,000. When given details of two five year mortgage deals to compare, the largest group of respondents said they thought the difference on a GBP120,000 mortgage with an interest rate at 5.6% compared to a rate of 6.6% would be between GBP500 and GBP2000. Another 23% said they had no idea at all. Only 25% of people correctly identified that the difference could be GBP4,000.
The research also showed that men are more mortgage savvy than women. 33% of men answered correctly compared to less than a fifth of women. It also revealed that 31% of those aged 55-64 guessed correctly the true value compared to just 16% of those aged 18-24.
Matthew Carter, Nationwide Building Society’s divisional director for mortgages, said: 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. The temptation may be to take a slightly higher rate as an easier, less hassle option. But, as our research shows, most people don’t understand the impact that just a 1% difference can make, meaning they could be wasting thousands of pounds.