Britons don’t understand how mortgages work – Barclays survey

A new study by Barclays Bank suggests that despite most Brits either owning a home or aspiring to be future homeowners, consumers are less familiar with the factors that influence mortgage rates, or how mortgages work. 

Whilst 88% of people are aware of the Bank of England Base Rate, over a quarter (26%) report that they do not understand what it means, and 35% have never heard of the Monetary Policy Committee. 

Swap rates (which are an indication of where the base rate will be in future and help determine pricing for fixed-rate mortgages) are even less well recognised, with half (49%) having never heard of them.

However, there are signs that Britons are investing more time into understanding how the market works. 

Nearly one in six renters and mortgage holders (15%) say they have become more engaged in news around the UK economy in the last year, given the impact on their housing costs, particularly amongst 18 to 34-year-olds (22%).

For mortgage holders, news coverage was the top source of information selected (31%) for where to seek more information about how the Base Rate impacts their mortgage, closely followed by Consumer Advice websites (27%) and Mortgage Providers (25%). 

A fifth of 18 to 34-year-olds said they go to friends and family, and another fifth cited social media as a main source of information. In contrast, these sources were only selected by 4% of over 55s.

A spokesperson for Barclays says:

“The base rate reduction on August 1 was certainly a promising sign for UK homeowners and the wider economy, with over half of consumers saying it made them more confident in their household finances.

“However, it’s important to remember that unless you’re a homeowner on a variable or tracker mortgage, it may be some time before you notice a tangible difference in your monthly bills.

“For example, those on fixed-rate mortgages will need to wait until they roll off or remortgage to determine whether their repayments will rise or fall, and for renters there’s even less of a clear cause and effect when it comes to pricing.

“Whilst it’s by no means mandatory for homeowners to understand the inner workings of the mortgage market, it’s encouraging to see consumers staying on top of financial news, so they can be empowered to make the best financial decision when the time comes.”

Kindly shared by Estate Agent Today