Britain’s debt driven boom has come to an end. The Bank of England has slashed interest rates by a massive 1.5%.
These are tough times on the High Street but there are some simple steps you can take to get out of debt and make your finances more secure.
NB: During the 60 second interview in the Metro newspaper this morning Martin Lewis of Moneysavingexpert.com advised people to use their savings to pay off their mortgage. Do not do this.
Everyinvestor’s advice is for you to hang on to your savings and to try and reduce the cost of your mortgage. You may need your savings if your company has to make redundancies or you fall ill or any one of a hundred other unexpected events occurs.
Step 1: Act now and recession-proof your credit card debt
Banks and credit card companies have become more cautious about giving out credit cards and the credit limits they allow borrowers. This process is likely to get worse as the economic conditions get worse. If you have credit card debts then you need to take advantage of the balance transfer credit card deals on offer now. They may not be around tomorrow.
The best balance transfer credit card on the market is the Virgin Money card. We recommend that everyone with expensive credit card debt or who has an existing balance transfers deal that is coming to an end should take advantage of Virgin’s 16 month balance transfers offer as soon as possible.
Sixteen months interest on a debt of £3,000 at an average credit card APR of 16.9% would add up to £676. Switching to a Virgin credit card would save you all that interest (£676) less the balance transfer fee of 2.98% (£89.40).
Not switching to a balance transfer credit card could be costing you hundreds of pounds.
More balance transfer credit cards
Step 2: Review your mortgage - is it still competitive?
The shock interest rate cut by the Bank of England promises to set the mortgage market alight. The question of course is: how much of the rate cut will mortgage lenders pass on to their existing customers and what will the new deals on offer look like?
It’s too early to be sure which way the lenders will jump. Good old Abbey raised their tracker mortgage rates by 0.5% the day before the rate cut in a blatant defence of their margins against what was anticipated to be a 0.75% rate cut. It will be interesting to see how Abbey reacts to the actual 1.5% cut.
The best thing you can do as a mortgage borrower is to evaluate your current deal and monitor our mortgage comparison tables. We will be updating them as soon as new mortgage offers become available and we’ll be covering new deals in depth on the website as they are offered. Check back with us often. A remortgage could save you thousands of pounds a year.
Compare tracker mortgages
Compare fixed rate mortgages
Step 3: Challenge each and every insurance renewal quote
No matter what the insurance policy, you are almost certain to be able to improve on the price you are offered as a renewal. Car insurance, home insurance (including both buildings insurance and home contents insurance), travel insurance and pet insurance can all be had for less money if you shop around.
Use our insurance comparison tables and the insurancewide quote search engine to save yourself time and money on those essential insurance policies. You will find the insurancewide quote search tool at the top of each of our insurance comparison tables.
Compare car insurance
Compare home contents insurance
Compare pet insurance
Step 4: Consider insuring your income against redundancy or ill health
Payment protection insurance is a difficult product to recommend. It is not suitable for everyone and insurers have a bad record when it comes to selling it to people who don’t need it or can’t claim on it.
People who should not take this insurance out include the self-employed, anyone who has already been told their job is at risk or their company may make redundancies and anyone who thinks they will lose their job within six months of taking out the cover. You won’t be covered in any of these instances.
But if you have no savings or you don’t have enough to cover three months of redundancy then you should consider taking out income protection insurance at least temporarily until the economic situation improves.
Get an Income Protection quote
Step 5: Beat the energy price rises by getting the best deal available
If you are on a standard energy tariff you are literally throwing money away every time you turn on a light or run a bath. Switch to an online tariff and you will save hundreds of pounds a year in gas and electricity bills.
If you also take the opportunity to switch to monthly direct debit and paperless billing you will maximise your savings. This really is worth doing. No-one should be on a standard tariff - they are a serious rip-off.
If you have already gone online and pay by direct debit then it is still worth checking to see if your energy deal is competitive. You may be able to take advantage of new offers in the market.
If you are on a pay as you go meter then ask to get off it. The rates you pay are unfair and exploitative. If you are able to control your energy use then switching to an online tariff and paying by monthly direct debit will cut the size of your bills.
Compare home energy deals
