Just a couple of years ago the crippling base interest rate in the UK meant that many homeowners were unable to keep on top of sky high mortgage repayments, and many others had to default on other unsecured debts in order to ensure that they could keep on top of their mortgage repayments and avoid losing their homes.

However, the ongoing financial crisis and slumping economy resulted in the Bank of England deciding to slash the base rate in a series of dramatic cuts last year, and between October of last year and April of this year the base rate fell to just a tenth of its level, dropping from 5 percent in October to just 0.5 percent by April.

Of course, for those on variable rate mortgages this has resulted in repayments plummeting. After a period of financial hardship the cut in base rate came as a welcome relief to many homeowners, with some finding that their repayments have been cut by a huge amount due to the lower base rate. Since April of this year the base rate has remained unchanged at 0.5 percent, which is the lowest level in the three hundred and fifteen year history of the Bank of England. Furthermore many industry officials have predicted that in the current climate the central bank plans to keep the rate at this level until around the middle of next year, at which point rates may start to rise again.

This means that consumers who are saving money because of the lower interest rate should think carefully about how to most effectively use this extra money before rates start to rise again, and there are a number of options open that could really benefit you in the future in terms of your debts and finances. Many homeowners who have seen their repayment requirements drop through the floor have already realised just how invaluable this extra money can be towards their future, and have found far more effective ways of using this cash than just blowing it.

One obvious and very effective way in which you can use this extra money is to overpay on your mortgages, and this will benefit you in many ways. You can save huge amounts of interest to the tune of tens of thousands of pounds in some cases simply by overpaying on your mortgage repayments each month. What’s more you can also reduce the term of the mortgage by a significant number of years, so you will pay far less and clear your mortgage debt far earlier.

If you do not wish to use the extra money to make top up payments of overpayments on your mortgage there are also a number of other effective ways in which you can use this extra money. If you have credit card debt hanging around your neck then it can be very beneficial to make extra payments on your credit card balances with the extra cash, as this will help to release you from this burden of debt, and could save you years of repayments and a fortune in interest.

You could also put the money towards other debts such as loans and car finance, which again would rid you of debt far earlier and could mean big savings in interest. Using the extra money to pay off your debts will help to release you from repayments far more quickly, and the very low interest rate at present provides the perfect opportunity to do this. For homeowners the general consensus seems to be that overpayments on mortgages is the best option, so this is definitely something that you should consider.

Related posts:

  1. Get your debts under control this year
  2. Nearly a century to clear a £5000 debt with Barclaycard
  3. Repossession levels have rocketed in the UK
  4. Helpful Advice for Those Drowning in Debt
  5. Interest rates left on hold again

Tagged with: • • •

Filed under: Articles

Like this post? Subscribe to my RSS feed and get loads more!