Barratt Homes surveyed 500 homeowners in the UK and found more than a third (37%) were not familiar with how interest rates are set.
Half of people aged 21 to 30 said they had no knowledge at all, showing the biggest gap in understanding.
The study also found 43% of first-time homeowners did not know how interest rates influence their repayments, and the same proportion were not confident about their current mortgage rate.
When asked about mortgage types, 16% could not explain the difference between a fixed-rate and adjustable-rate mortgage.
Barratt Homes partnered with mortgage expert Terry Higgins, managing director of TNHG, to explain how interest rates affect mortgages.
Higgins said: “When interest rates are low, borrowing is cheaper, which can make larger loans more appealing.”
He added: “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.”
Higgins noted that keeping up to date with rate trends and Bank of England updates can help buyers choose the right moment to secure a rate, even though the market itself cannot be controlled.
