UK borrowers are not clued up about how a rise in the interest rate on their mortgage could affect their monthly outgoings.

Three quarters of mortgage holders do not know how a one per cent rise in interest rates could affect their mortgage payments, according to research carried out by the Consumer Financial Education Body – the new independent body responsible for helping consumers understand and manage their finances better.

And, despite more than half of mortgage customers being on the opinion that interest rates will change in the next nine months, one in seven are unaware what type of interest rate they have – tracker, fixed rate, standard variable, or discounted.

More than half of mortgage holders said they have no plans to review their mortgage situation, or they will leave it until the last minute, meaning they could be paying over the odds for their mortgage; a further 15 per cent said they do not know when their mortgage deal expires.

If their outgoings rose £200 a month, 14 per cent of borrowers (which amounts to two million people) said they would not know what they would cut back on in order to keep up with their mortgage payments.

CFEB has launched Stay on top of your mortgage, a campaign to help homeowners be prepared if interest rates or their personal circumstances were to change.

The advice from the CFEB includes finding the paperwork which they received from their lender when the mortgage was taken out, which will have details of the interest rate they are paying and when the deal ends.

Tony Hobman, chief executive of the Consumer Financial Education Body said: “Interest rates have been at record lows for some while now. Although there is uncertainty about when this will change, it is clear from our research that many people with mortgages haven’t thought about what it would mean for their monthly payments, or where they would find the extra money in their household budget if their mortgage rate was to go up. 

“Lack of time means many of us often put off reviewing our finances,” he said, but added that thanks to services like the CFEB, “it doesn’t have to be time consuming to keep on top of your money matters.”

© Fair Investment Company Ltd