British homeowners need more education on the realities of mortgage rates

British homeowners need more education on the realities of mortgage rates [Photo: PRImageFactory via iStock]

More knowledge may be needed in the mortgage market for consumers, after it was revealed that only a quarter of those who own a home in the UK actually know what a Bank of England (BoE) base rate change would mean for their mortgage rates. 

According to research carried out by Trussle, just one in four people who currently have a mortgage know how a cut in the base rate means they could save money by moving to a fixed rate mortgage. 

It said that since the cut in interest rates from 0.5 per cent to 0.25 per cent was brought about by the BoE in August of this year, tracker rates on mortgages nationwide have fallen by 0.25 per cent, while those with fixed rate products have seen rates fall in price to as little as 1.39 per cent. Meanwhile, those on standard variable rate mortgages have not seen their costs fall quite as much, meaning mortgage holders saving far less money than they could be if they had the right knowledge about the sector. 

Trussle said that those who are on expensive standard variable rate mortgages at the moment could be saving as much as £380 per year by moving to a two-year fixed product, but with so few consumers having the knowledge they need about the market, few are actually making the switch. 

Its report found that 27 per cent of people are aware of how a cut can affect their mortgage rates. But it also found a disparity between men and women with mortgages. Some 35 per cent of men are aware of the benefits of changing mortgage, compared to just 19 per cent of women. 

It was also found that there's generally a gender divide when it comes to keeping track of mortgages at all in the UK, with 33 per cent of men saying they always keep track of what they are being charged for their mortgage repayments, compared to just 23 per cent of women. 

"The mortgage sector is shrouded in a level of complexity and jargon that continues to discourage borrowers from acting swiftly to secure a better deal. The base rate is the most significant factor affecting mortgage rates, so it’s a shame that so few understand its effect on the most important financial commitment of their life," said Ishaan Malhi, Trussle's chief executive officer.