Huge rise in number of cheap five-year fixed-rate mortgages
Alliance and Leicester Mortgages found that six in ten do not understand how monthly mortgage repayments are affected by a tracker mortgage rate, with four per cent thinking their monthly repayments are fixed.
A fifth of mortgage holders believe the tracker mortgage rate is linked to the FTSE 100 and only a third having the knowledge that it follows the Bank of England base rate.
The mortgage lender's director of mortgages, Stephen Leonard, said these findings were quite worrying.
He points out that choosing a tracker mortgage could have certain advantages, especially with interest rates currently at low levels.
However, homeowners should ensure they fully understand what type of mortgage they have, Mr Leonard says. They can then be financially prepared should their monthly payments rise.
One in three men correctly defined tracker mortgages, while 61 per cent of first-time buyers aged 30 to 39 were unable to do so.
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