Homeowners 'oblivious to rate risk'

Three-quarters of homeowners do not know what impact an interest rate hike would have on them, a new survey has indicated.

Around 74% of people with a mortgage admit they did not know how a 1% rise in the Bank of England base rate would affect their monthly outgoings, according to the newly formed Consumer Financial Education Body (CFEB).

The body said an increase in rates could have a significant knock-on effect for households, meaning their expendable cash could be greatly diminished - and even putting some at risk of repossession.

Even more worryingly, the CFEB found that 15% of people do not even know what type of mortgage they have, such as whether it is a fixed rate deal, meaning they would be unaffected by an interest rate rise - or whether it is a variable rate one, meaning their monthly payments would go up.

A further 15% also do not know when their current mortgage deal comes to an end.

The lack of awareness comes despite the fact that 51% of people with a mortgage expect interest rates to rise during the coming nine months.

Just over half of people said they had no plans to review their mortgage, or would leave doing so until just before their existing deal expired, while 14% admit they did not know what they would cut back on if their mortgage repayments rose by £200 a month.

Tony Hobman, chief executive of the Consumer Financial Education Body, said: "Lack of time means many of us often put off reviewing our finances, but it doesn't have to be time consuming to keep on top of your money matters."

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