Wednesday, April 13, 2011
Category:
Consolidation
According to moneysupermarket.com, high inflation has put a strain on consumers’ finances and has caused nearly one in ten Brits to stop saving this year.
This information has come following a survey, which also uncovered that one in five people now save less due to the rising cost of living. Meanwhile, more than half of the nation is reportedly unable to set any money aside at all. Moneysupermarket.com found that one in eight of their users have chosen to overpay their mortgage instead, whilst interest rates are low.
The comparison site has revealed that following the Bank of England’s announcement that inflation has dropped to 4 percent, ‘basic rate tax payers will now need an account paying at least 5.01 percent to gain benefit in real terms from their savings’. This reportedly stands at 6.67 percent for higher rate tax payers and 8.01 percent for 50 percent tax payers. However, it has been pointed out that there are currently no easy access savings accounts that beat the effect of taxation and inflation.
Head of banking at moneysupermarket.com, Kevin Mountford, commented: "With cuts in benefits, rises in National Insurance contributions, the lowering of the higher rate tax threshold and the general increase in the costs of living, many Brits are feeling the squeeze. Unfortunately, savings become one of the first casualties when people have to tighten their purse strings.
"Having a saving pot to fall back on to when times are difficult is vitally important, and while it may not be a priority for many people, trying to put some money aside, no matter how small, can make a real difference. In an ideal world, you should have three months' outgoings put aside for a rainy day, but for many people this will seem an unachievable amount. However, taking control of your finances and reviewing all of your outgoings to see where you can get better value can help free up vital cash which can then be used for savings. People should also be thinking about ways to maximise their income and spending wisely, for example using discount vouchers and shopping around.
"Those savers who have stopped saving because they believe rates are too low for switching to be worthwhile, are missing out on some of the best rates we have seen since base rate dropped to record lows. If you are prepared to lock away your money for five years, then you can get a rate as high as 5.00 per cent - ten times that of base rate!"
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Homeowners who are struggling to set money aside due to juggling expensive debt repayments each month could consider taking out a secured loan to ease the pressure. One of many finance options available, a secured loan for
consolidation could be used to tie up existing debts into one manageable monthly repayment. This single monthly repayment could even be lower than the sum of current outgoings – thus freeing up useful money, which could potentially be saved for a rainy day if desired. However, if opting for a secured loan to consolidate debt, it should be remembered that consolidating your debt may increase the amount you pay back overall and extend the repayment periods of your debts.
