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Millions confuse saving and borrowing rates

Millions of consumers are unaware about the relationship between the interest rates they pay on borrowings, including mortgages, and how much they receive on savings, says Intelligent Finance.

According to its research of 1,000 people carried out last month, one in three of the UK adult population – nearly 15 million adults – do not know the connection between the rates paid on their savings and their mortgage borrowings.

One in 10 adults thought the interest rate their bank or building society pays them on savings is higher than the rate charged on their mortgage and one in seven thought they were about the same.

IF warns that consumers&#39 uncertainty about even the basic relationship between credit and debit rates of interest is likely to hamper their financial planning.

But it says new offset banking provides consumers with the opportunity to enjoy what are effectively borrowing rates of interest on their savings while minimising the cost of their mortgages.

It says the fairer principles underpinning offset banking are proving a hit with consumers, with six out of 10 people agreeing that their banks should take account of the money they have deposited with them when calculating the interest they pay on their mortgage.

Chief executive Jim Spowart says: “The new breed of offset mortgages ensure that people&#39s money works harder for them.

“They can effectively reduce the rate they pay on their borrowings by allowing their savings to work in their favour.”

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