Friday, July 17, 2009
Category:
Personal Finance Tips
At a time when the economy is proving particularly challenging, first direct has offered some advice to assist people in successfully finding their way through the recession.
Manage your money: Keep up-to-date with interest rates to ensure that you are getting the best possible deal. first direct’s research has revealed that 17 million people are unaware of their savings rate, and 43 percent of homeowners are unaware of the interest they are paying on their mortgage.
Play the waiting game: It was found that 4 million homeowners are keeping a close eye on the ever-changing housing market in preparation for taking advantage of low-cost properties prior to prices rising. It could be possible to nab a bargain when the time is right. As a result, 25 percent of respondents feel ‘lucky’ and 18 percent feel ‘thrilled' with the opportunity.
Jimmy Kelly, first direct spokesman, commented: "There are many ways for canny money managers to benefit from the tough economic climate - all indications point to the fact that Brits are beginning to pay back their debts, which ultimately will be good news for the economy.
Switch to an offset: According to first direct, homeowners with savings could benefit from switching to an offset mortgage. For example, a homeowner with a £100,000 mortgage could cut the term by almost 3 years and they could save £18,322 in interest payments over the duration of the mortgage. In addition, offsetting means that savings no longer need to remain in under-performing taxable accounts. first direct have noted that a typical savings account will only accrue 0.18 percent, whereas the average homeowner will earn 4.6 percent via an offset mortgage.
Overpay your debt: Interest rate reductions in the past 12 months have led to lower loan repayments for many homeowners. However, by making larger repayments than necessary, homeowners could pay off debts more quickly. Where mortgages are concerned, this will mean a greater level of equity and therefore better deals when it comes to re-mortgaging.
A spokesperson for first direct concluded: "We're chipping away at record amounts of mortgage debt, with savvy savers starting to take advantage of the benefits of offsetting - our research reveals that new offset lending rose16 per cent in the last three months of 2008. In fact, offset mortgage lending now accounts for £1 in every £10 being lent to UK mortgage holders. In the past three years, 400,000 new offset mortgages have been issued, taking the amount of UK home-owners with an offset mortgage to 1.1 million."
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Homeowners who are looking to re-organise their finances, particularly their debts due to having multiple credit cards for example, could investigate the possibility of taking out a
secured loan. One of many finance options available, a secured loan for debt consolidation could leave the borrower with just one, straightforward repayment each month as opposed to juggling several. In addition, this new monthly repayment could be lower than existing outgoings, thereby potentially relieving financial pressures slightly. However, when taking out a secured loan to consolidate debt, it must be remembered that consolidating your debt may increase the amount you pay back overall and extend the repayment periods of your debts.
