Homeowners misunderstanding mortgages

Three quarters of Britons do not understand how much they could save from a one per cent reduction in their mortgage rate, research from Nationwide has found.

The study has shown that just 16 per cent of those aged 18 to 24-years-old were able to work out the difference in cost between a two year-fixed mortgage at 5.6 per cent and one at 6.6 per cent.

By contrast, almost double this proportion – 31 per cent – of those aged 55 to 64-years-old were able to deduce the correct amount.

"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," said Matthew Carter, Nationwide's divisional director for mortgages.

"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 one per cent difference can make, meaning they could be wasting thousands of pounds," Mr Carter added.

The base rate of interest is expected to decrease at least twice next year as the Bank of England reacts to the slowing economy.

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