Debt management: Consumers advised to 'pay down debt while interest rates are low'

29/01/2010

Consumers who have debts to pay off have been advised to deal with them while the interest rates remain low in order to save money in the long run.

David Kuo, director of The Motley Fool, has advised consumers that paying down debt now is a sensible option as the Bank of England interest rate will not remain at 0.5 per cent.

Mr Kuo said: "One option would be to pay down that debt so that, when interest rates do go up, at least the size of that debt has shrunk, and you are paying interest on a much smaller amount than if you hadn't done anything with it in the first place."

The advice follows news from Woolwich (Barclays' mortgage branch) which found that on average people were saving £110 a month on their mortgages when compared to rates from two years ago.

Mr Kuo suggested that this monthly saving could be used to pay down consumer debts, of which the UK has a collective £1.4 trillion.

Director of EuroDebt Kevin Still commented: "There are mixed arguments whether you pay off your mortgage at an accelerated rate or clear the most expensive debts first, where credit card debt is likely to feature.

"We are concerned for those that have been reliant on the rate reduction just to keep their monthly finances afloat. We expect to see more 'middle class' households struggle with debt if interest rates rise, where re-mortgaging or debt consolidation is not an option."

Tags; Current UK Economy,

Regional Debt Advice; Debt Advice Woolwich,

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