Over half of Britons do not know what 'interest rate' means, a survey suggests

Seventy per cent could not identify the current Bank of England base rate as 0.25 per cent, according to MoneySuperMarket research

A hike in interest rates would increase monthly repayments for people on a tracker mortgage (Rex)

Over half of Brits do not know what the term “interest rate” means, new research suggests.

The results of a MoneySuperMarket survey come ahead of a possible interest rates hike on Thursday when the Bank of England’s monetary policy committee meets – it is expected it will vote for a 0.25 per cent increase to 0.5 per cent.

Of those MoneySupermarket surveyed, 70 per cent could not identify the current Bank of England base rate as 0.25 per cent.

Young people were less informed on the topic with 81 per cent of 18-24 year olds not understanding the term “interest rate” compared to 57 per cent of those aged between 45 and 54.

Men and women also differed in their knowledge of interest rates. Among male respondents, 40 per cent were able to identify the current base rate compared to 25 per cent of women. And 32 per cent of women said their partner was more knowledgeable on interest rates while only seven per cent of men said the same.

The research also showed a knowledge gap between regions of the UK. Those in the South West were the most knowledgeable with 45 per cent of respondents correctly stating the base rate, followed by the South East and Northern Ireland (both 35 per cent).

People in Wales were the least likely to know the figure, with only 14 per cent correctly identifying it.

Sally Francis, money expert at MoneySuperMarket, said that as the base rate had moved little since 2009 it is understandable that people aren’t aware how a change would impact their finances.

“The anticipated rise of 0.25 per cent might seem small but it could pave the way for a string of increases that could impact some of the biggest bills,” Ms Francis added.

She pointed out that an increase in the base rate, together with an end to the Funding for Lending Scheme – an incentive from the Bank of England for financial institutions to borrow from it cheaply – early in 2018 would benefit savers.

For those who are able to save, a rise in interest rates should increase the interest they earn on current account deposits. However, borrowers would see interest rates rise on personal loans.

Meanwhile, homeowners who are on a tracker mortgage will find their monthly payments rise as soon as an increase in the base rate is announced.

Ms Francis said people on a capped or discount mortgage could also see increases on their repayments in the event of a interest rates rise. She explained that switching to a fixed rate mortgage could “save thousands in the long run, especially if the base rate continues to rise.”

Fixed rate mortgages mean that borrowers monthly repayments stay the same for their fixed period.