Seven out of 10 people (70%) don’t know what the current Bank of England base rate is, according to research from MoneySuperMarket.
The governor of the Bank of England has hinted that there may be a base rate rise in early November when the Bank’s Monetary Policy Committee meets.
Currently the base rate is 0.25%, the lowest it has ever been. If the rate is increased it is likely to be by 0.25%, which would take it up to 0.5%. This would be the first rise in almost a decade.
Despite the impact a rise will have on everyday finances – including savings and mortgages – just one in 100 Brits understands how a rate rise would affect their mortgage repayments.
The research found that almost a quarter (23%) of respondents said they didn’t know how it would affect their pay packet, and 41% believe their pay would not be affected at all.
When asked what the term ‘interest rate’ meant, over half (55%) admit to not knowing, while nearly one in 10 (8%) believe it is the value of how much interest their bank has in them.
The research also uncovers a knowledge gap between generations, with 81% of 18-24 year olds not understanding the term ‘interest rate’, compared to just over half (57%) of 45-54 year olds.
Among the genders, 40% of men were able to identify the current base rate compared to just a quarter of women (25%). Nearly a third (32%) of women admitted their partner is more knowledgeable on the topic compared to just 7% of men.
When asked who in their household was the most knowledgeable about rates as a whole, 43% claimed it was themselves – yet the majority of people who answered this way (63%) actually got the current rate wrong, or didn’t know it.
There was also a clear gap among different areas of the UK. People in the South West were the most knowledgeable, with 45% of respondents correctly stating the base rate, followed by 35% in the South East and Northern Ireland. Only 14% of those in Wales were able to provide the right figure, the lowest of all the regions surveyed.
Sally Francis, money expert at MoneySuperMarket, commented: “There’s been very little movement in the Bank of England base rate since 2009 so it’s understandable that most Brits aren’t sure how a shift could affect their finances.
“The anticipated rise of 0.25% might seem small but it could pave the way for a string of increases that could impact some of the biggest bills.
“We’re encouraging people to take control of their finances today and learn how any future changes could affect their money.
“A rise in the base rate, coupled with the end of the Funding for Lending scheme – a Bank of England incentive for financial institutions to borrow cheaply from it – early next year is good news for savers, but if you’re on a tracker mortgage your monthly instalments will rise as soon as any base rate increase is announced.
“If you’re on a capped or discount mortgage, you could also see increases so acting immediately could save you thousands in the long run, especially if base rate continues to rise.
“Switching to a fixed rate mortgage ensures that your monthly repayments stay the same for the duration of your fixed period, providing certainty and stability in your finances.”
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