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Shahla
Money Managing Guru
Joined: 13 Nov 2004
Posts: 3324
Cash Points ££ 126163.28
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 Posted: Wed Nov 28, 2007 1:43 pm Post subject: Poor Understanding of Monetary Value of 1% |
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By: Nationwide
Research from Nationwide Building Society reveals that 75% of people in the UK don't understand the monetary value a 1% difference in mortgage rates can make. A 1% difference in rates on a five year fixed rate mortgage deal could be worth over £4,000*. When given details of two five year mortgage deals to compare, the largest group of respondents (28%) said they thought the difference on a £120,000 mortgage with an interest rate at 5.6% compared to a rate of 6.6% would be between £500 and £2000. Another 23% said they had no idea at all. Only 25% of people correctly identified that the difference could be £4,000.
The research also showed that:
Men are more mortgage savvy than women. 33% of men answered correctly compared to less than a fifth of women (18%);
Experience counts! 31% of those aged 55-64 guessed correctly the true value compared to just 16% of those aged 18-24;
The South-East, Midlands and Scotland had the highest regional score. 28% percent of people in these regions knew the difference compared to their counterparts in Wales and the South West where only one in five people (19%) were right.
If by shopping around, a consumer finds a mortgage deals that saved £4,000, this could cover the costs of:
The majority of a household's annual council tax or utility bills: an extra £800 a year would cover a significant proportion of an average £1,100 a year council tax bill or £1,200 a year utility bills;
£65 extra a month towards grocery shopping;
£800 a year towards mortgage overpayments;
An extra holiday a year.
Matthew Carter, Nationwide Building Society's divisional director for mortgages, said: "People's lives are busier than ever in the run up to the festive season and, as a result, they may be less inclined to shop around for the best deal. The temptation may be to take a slightly higher rate as an easier, less hassle option. But, as our research shows, most people don't understand the impact that just a 1% difference can make, meaning they could be wasting thousands of pounds.
"We therefore urge borrowers to make time to shop around and compare the total costs over the life of a deal before making a final decision. After all, a £4,000 plus saving on a 5 year deal for a couple of hours of work is a pretty good return!"
Example of cost savings on 5 year fixed rate mortgages:
Remortgage, switcher and additional borrowing:
http://www.marketoracle.co.uk/Article2905.html |
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