Following recent problems faced by the Chinese Stock Exchange, Martin Lewis, the Money Saving Expert, has advised that savers may be better off paying off their mortgage debt, rather than saving their hard earned cash.
Due to the financial problems in China, the world economy, including Britain, is unlikely to increase the UK base rate. While this may be good news for some, it means that interest rates for savings will remain low for the near future. For potential savers who also have outstanding debts, it may be worthwhile using savings to pay off those debts and saving money in huge interest payments.
According to Martin Lewis, a popular columnist for the Daily Mirror and broadcaster, if you have debts on a credit card these are definitely worth paying off if you are paying interest on them. A debt on a credit card of £1,000 would cost around £190 in interest, while savings of the same amount may earn you £13 a year.
However, making the decision to pay off your mortgage may not be as clearly defined. Lewis advises anyone considering this option to seek professional advice, preferably from an adviser who has CeMAP training. The decision will be based on a number of factors, including any early redemption penalties, the rate of your mortgage interest and whether you have an emergency fund. If your mortgage interest rate is very low and you can find a savings account that pays a reasonable rate of interest, you may be better off saving. Seek advice from an expert so you make the most cost effective decision.