| 8.4°C Belfast

Cost of rates hikes lost on most homeowners

Three-quarters of homeowners do not know what impact an interest rate hike would have on them, a survey indicates today.

Around 74% of people with a mortgage admitted they did not know how a 1% rise in the Bank of England base rate would affect their monthly outgoings, according to the newly formed Consumer Financial Education Body (CFEB).

More worryingly, 15% of people do not even know what type of mortgage they have, such as whether it is a fixed-rate deal, meaning they would be unaffected by an interest rate rise, or whether it is a variable rate one, meaning their monthly payments would go up.

A further 15% also do not know when their current mortgage deal comes to an end.

The lack of awareness comes despite the fact that 51% of people with a mortgage expect interest rates to rise during the coming nine months.

Just over half of people said they had no plans to review their mortgage, or would leave doing so until just before their existing deal expired, while 14% admitted they did not know what they would cut back on if their mortgage repayments rose by £200 a month.

Tony Hobman, chief executive of the Consumer Financial Education Body, said: "Interest rates have been at record lows for some while now.

"Although there is uncertainty about when this will change, it is clear from our research that many people with mortgages haven't thought about what it would mean for their monthly payments, or where they would find the extra money in their household budget if their mortgage rate was to go up.

"Lack of time means many of us often put off reviewing our finances, but it doesn't have to be time consuming to keep on top of your money matters."

The group has set up a mortgage calculator so that people can see what impact interest rate rises would have on their monthly repayments, while it also provides impartial mortgage comparison tables to help people find the best deal. It can be found at www.moneymadeclear.org.uk/mortgages.

The CFEB was set up in April by the Financial Services Authority to take over responsibility for consumer financial education.