Borrowers ‘clueless’ over interest rates

Its survey found that only 25 per cent of respondents correctly identified that having a 5.6 per cent five-year fixed rate, instead of a 6.6 per cent product, on a £120,000 mortgage could save them over £4,000 over the life of the deal.

While 28 per cent incorrectly believed the difference would be between £500 and £2,000, 23 per cent had no idea at all about the difference.

Matthew Carter, divisional director for mortgages at Nationwide, said: “People’s lives are busier than ever in the run up to Christmas and, as a result, they may be less inclined to shop around for the best deal. But, as our research shows, most people don’t understand the impact that just a 1 per cent difference can make, meaning they could be wasting thousands of pounds.”

Only 16 per cent of 18-24-year-olds correctly understood the difference compared to 31 per cent of 55-64-year-olds, while 33 per cent of men knew the distinction against 18 per cent of women.

Daniel Clayden, director of Clayden Associates, said: “It’s interesting that only 25 per cent know. It should be 100 per cent, because with the Key Facts Illustration, the difference of 1 per cent is stated. The main problem is that people are switched off when it comes to money and have poor habits.”

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