Interest rate calculations confusing many Brits

Significant numbers of Britons are severely underestimating or overestimating the effect that interest rate rises are having on their finances, according to new research from Credit Expert.co.uk.

The financial website notes that a theoretical 0.5 per cent rate hike would see monthly repayments on a £100,000 interest only mortgage increase by £40. However, 19 per cent of those questioned thought that payments would rise by at least £80, with 17 per cent believing that the increase would be no more than £10.

Nonetheless, despite this confusion, the study added that Britons are increasingly secure in their finances, with consumer confidence rising two points to 98 over the last quarter.

"Although the current Personal Credit Index shows that people generally are more confident than in the last quarter, the lack of understanding of key terms and the effect of interest rate changes is worrying," acknowledged CreditExpert.co.uk managing director Jim Hodgkins.

"It's important for people to be familiar with standard financial terms and stay on top of changes that affect their personal finances so they can make the best possible decisions and choices," Mr Hodgkins added.

Interest rates now appear to be heading down rather than up, though the Bank is unlikely to cut rates when it meets to make its November decision in just over a week's time.

Finance your build or renovation with one of BuildStore's unique finance packages

© Adfero Ltd