Nearly 25% of homeowners are totally oblivious to the implications of a rise in the base rate on the amount they will have to pay each month.
Of those on standard variable rate mortgages, around 16% are in the dark regarding the effect an increase would have on their outgoings. Another 16% think their monthly payments would go up, but aren’t sure whether they would increase by the same amount as the base rate.
Of those homeowners on a tracker rate, more than 10% are uncertain about how an increase to the base rate would affect their repayments, and nearly 20% realise their monthly payments would increase but don’t think this is necessarily by the same amount as the base rate rise.
Although homeowners on fixed-rate mortgages aren’t affected by changes to the base rate, many of them were unaware of this. Around 20% didn’t have a clue whether the base rate had any affect on their repayments, and 28% believed their repayments would, at some stage, become higher as a result of any base rate increase. 5% of those who wrongly thought there was a link thought that the increase would be automatic.
Inescapably, the base rate will increase. Therefore, it’s vital that homeowners understand the implications in terms of their personal finances. For people on tracker rates, standard variable rates and fixed rates, there is widespread ignorance regarding the implications of rising interest rates. Unless people get to grips with the relationship between the base rate and their mortgage payments, or the lack thereof, they won’t be able to budget properly for the future. With this in mind, it’s obvious that all homeowners should take the time to understand how different types of mortgages work, and regularly assess their mortgage arrangements in order to establish whether they have the most appropriate package for their situation.
If you need help making sense of it all, get mortgage advice Manchester.