According to a recent survey, one in four homeowners do not know what their mortgage interest rate is, and that could mean they are paying more than they need to on their mortgage repayments.
Most homeowners know that the Bank of England base rate is low – even if they don’t know what it is. Currently, it is 0.5 per cent and has been for the last twelve months; that’s a record low.
Many homeowners have a tracker or a variable rate mortgage – which generally means it adjusts in line with the Bank of England base rate, depending on the terms of your mortgage.
Since the Bank of England base rate dropped so low, some mortgage lenders have increased their own standard variable rate (SVR) because the cost of lending to them has not decreased in line with the base rate.
According to a survey from the Post Office, 28 per cent of mortgage holders do not know what interest rate they are paying. The survey polled 2,000 British homeowners.
The reduction in interest rates is, in many cases, the main reason that many homeowners have been able to cope throughout the recession but now that the recession is officially over and things are starting to change, experts are predicting that the Bank of England is likely to increase interest rates again.
By not knowing what interest rate a mortgage is on, the 35 per cent of borrowers that are paying a standard variable rate may be missing out on a better mortgage rate and could even have been hit by an increase in their SVR without knowing the implications.
Marco Hughes at the Post Office, said: “Although it might seem that staying on your current SVR is the easiest thing to do, you are much more vulnerable to interest rate rises. Some providers have increased their SVRs quite significantly even though the Bank of England base rate has not moved and as a result many borrowers are seeing their monthly mortgage repayments increase more quickly than they thought.”
Mr Hughes, and many mortgage advisors across the country, believe that better deals are out there and if you are eligible to switch mortgages, it might be an idea to consider it now before interest rates do rise.