Over a third (37%) of people were unfamiliar with interest rate determination, and half of those aged 21 to 30 lacked a basic knowledge of mortgage rates, research from Barratt Homes in collaboration with Terry Higgins, managing director of TNHG, revealed.
The research found that 16% could not differentiate between fixed-rate and adjustable-rate mortgages.
Higgins said: “When interest rates are low, borrowing is cheaper, which can make larger loans or longer terms more appealing.
“But when rates rise, borrowing becomes more expensive, so you may need to adjust your loan size or consider a different mortgage to keep payments affordable.”
Higgins added: “In an ideal scenario, a good mortgage rate is one that’s lower than the current market average.
“However, what constitutes a ‘good’ rate is different for everyone.
“It largely depends on your individual circumstances, like your credit score, the size of your deposit, and how long you’re planning to stay in the property.”
Securing a low interest rate involves preparing finances and understanding lending factors.
Improving your credit score helps, as Higgins advises checking for errors, paying off debts, and ensuring timely bill payments.
He said: “Don’t settle for the first offer you receive. Take the time to compare rates from multiple lenders.
“An advisor can also help you access exclusive deals that aren’t always available directly to borrowers.”
The mortgage type affects offered rates; fixed rates provide stability, while variable rates might offer lower starting costs but risk higher payments, according to Higgins.
He added: “Think about your financial priorities. If you’re looking for predictability, a fixed rate might be worth the slightly higher initial cost.
“If you’re comfortable with some fluctuation, a variable rate could save you money in the short term.”
Higgins also stressed that timing your application with market trends can also influence rates.
He concluded: “While you can’t control the market, being informed about rate trends and Bank of England announcements can help you make smarter decisions about when to lock in a rate.
“Preparation is key, and taking the time to get your finances in order and understanding your options will pay off when it comes to finding the best rate for your mortgage.”
