75% of Homeowners Clueless About Their Mortgages
I was reading an article earlier this week about how clueless homeowners are about their mortgage, and the statistics were quite shocking…
According to Consumer Financial Education Body (CFEB), more than 75% of homeowners do not realise the full impact a 1% increase to their mortgage rate could have on their repayments.
And I have to admit this stat shocked me.
Sure because of my involvement in property investment I tend to monitor my mortgage rates quite closely – after all, the smaller my repayments are the more cash flow I will experience. However, it still surprised me that so many people are completely unaware of how damaging such an increase could be to their finances.
Take this scenario for example. You have got a £210,000 mortgage for 25 years at a current rate of 4.49%. Your repayments per month would be £1,166.
However, if you were to increase this mortgage rate by just 1% (to 5.49%); your repayments would increase to £1,288 a month – that is £122 more per month OR to put it bluntly £1,464 extra per year!
Now that is a dramatic increase by anyone’s standard, and considering I was aiming low when I suggested those interest rates, this sum would actually be a lot higher in real life.
But the stats get even worse:
- 54% of homeowners have got no intention of reviewing their mortgage to see if they can get a better deal
- 2 million didn’t know where they would find the cash to cover an increase in their mortgage
- 1 in 7 of homeowners weren’t sure whether they had a fixed, standard variable, tracker or discounted rate mortgage
- 15% didn’t know when their existing mortgage was going to end
Fortunately the Bank of England is planning to keep the base rate at 0.5% for the time being. However, it is obvious that when they do make the decision to increase it a lot of homeowners are going to be in for a surprise.
Wendy xx
