Millions of UK homeowners are unaware of the effect a rise in the base rate will have on their mortgage repayments, according to new research from unbiased.co.uk.
A total of 3.5 million homeowners could be in for a nasty shock once interest rates start to rise. 16% of those with a standard variable rate deal and 13% of those with a tracker mortgage do not know how much their repayments will increase when the Bank of England base rate goes up.
18% of people with a tracker mortgage know that their rate will go up when the base rate does, but they don’t believe the increase will necessarily be as much as the base rate rise.
Surprisingly, even people with a fixed rate mortgage don’t seem to understand the mechanics of their deal. 20% say they are not sure what will happen to their monthly repayments when the base rate increases. Worryingly, 28% think their monthly repayments will increase at some point and 5% of them believe the increase will automatically occur as soon as the Bank of England raises the base rate.
The chief executive of unbiased.co.uk, Karen Barrett, said many homeowners are going to be in for a surprise when the MPC increases interest rates. An increase is inevitable and homeowners need to be prepared for the affect it will have on their personal finances.
If you are unsure about the terms of your contractor mortgage, now is the time to contact your mortgage lending company and familiarise yourself with the facts.
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