Millions of homeowners could face a "nasty shock" as the Bank of England prepares to announce its next interest rate decision next week.
An estimated 1.8 million fixed-rate mortgages are set to mature in 2025, with many borrowers potentially unprepared for changing financial conditions.
Experts warn the impact could be "particularly painful" for those who fail to recognise how interest rates have been evolving, especially high-earning families with substantial existing mortgage commitments.
A significant perception gap has been revealed in the Bank of England's February inflation attitudes survey. On average, people believed inflation was running at 4.9 per cent, far higher than the actual January rate of three per cent.
This misunderstanding extends to interest rates, with 41 per cent of respondents thinking rates on savings and borrowing had increased over the past year. Only 28 per cent correctly identified that rates had fallen.
The disconnect between public perception and economic reality could lead to poor financial decisions for millions of households.
Around 494,541 older people are still burdened with paying monthly mortgage paymentsGETTYSarah Coles, head of personal finance at Hargreaves Lansdown warned: "If you're too far off, you could be in for a nasty surprise."
Those with mortgages may not appreciate how rates have been falling, with the average 2-year fixed rate mortgage dropping from 5.63 per cent to 5.52 per cent between February last year and this year.
She said: "Those with a remortgage looming could end up rolling onto a standard variable rate if they assume fixed rates are still back at the levels we saw a year ago, and stick their head in the sand."
The impact could be most severe for high-earning parents who already face substantial mortgage costs.
These families currently have average mortgage payments of £1,163, according to the HL Savings & Resilience Barometer.
Any increase due to misunderstanding current rates "could be particularly painful for them," Coles said.
UK Finance anticipates a surge in remortgaging activity this year as these fixed-rate deals expire.
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Borrowers coming off low-rate deals could experience a steep jump in monthly repayments if they don't recognise how the mortgage market has changed.
The survey revealed a significant misunderstanding about interest rate trends, with 34 per cent of people expecting rates to rise over the next 12 months, while only 29 per cent anticipate a cut.
This contradicts market expectations, which are pricing in rate reductions.
In reality, average rates on easy access savings accounts have decreased from 3.17 per cent to 2.9 per cent.
Similarly, the average rate on a 1-year fixed rate savings account has dropped from 4.62 per cent to 4.19 per cent, according to Moneyfacts.
These misconceptions could lead homeowners to make costly financial decisions.
