Brits’ confusion over interest rates ‘worrying’
October 25, 2007 by admin
Filed under News, News-Mortgages
It is “worrying” how few people in the UK fully comprehend the impact of rising interest on their mortgage repayments, said CreditExpert.
According the credit report monitoring service’s Personal Credit Index survey, as many as 70 per cent of people asked, were not clear of the implications of the effect of interest on an example given to them and gave the wrong answer.
Respondents were asked to estimate the effect of a 0.5 per cent interest rise on monthly repayments for an interest-only mortgage of £100,000. Almost a fifth (19 per cent) guessed at £80 while 17 per cent estimated it at no more than £10. In fact, the correct answer was a £40 increase.
Furthermore, around eight in every ten mortgage holders were unaware of the meaning of annual percentage rate (APR).
Jim Hodgkins, managing director at CreditExpert.co.uk, said: “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.
“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.”
