Homeowners are missing out on the best mortgage rate deals available to them because they do not understand how tracker mortgages affect monthly payments, says research.
Over 8.4 million homeowners ñ 58 per cent of the total ñ do not know how a tracker mortgage works, says Alliance and Leicester.
Only a third of homeowners were able to tell researchers that a tracker mortgage is linked to the Bank of England base rate.
Almost a fifth thought that tracker monthly payments follow the FTSE 100 index. Four per cent thought that tracker mortgages have fixed monthly payments.
Homeowners’ lack of understanding leaves them at a severe disadvantage when they compare mortgage rate deals, warned Alliance and Leicester.
“It is quite worrying to think that such a large proportion of homeowners are unaware of what a tracker mortgage is and how it could save them money on their monthly mortgage payments,” said director of mortgages at the bank Stephen Leonard.
“There are certain advantages to choosing a tracker mortgage, especially with current low interest rates.
“However, homeowners should ensure they fully understand what type of mortgage they have; they can then be financially prepared should their monthly payments rise.”
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