Make consolidation a priority, families advised

Consumers should be making it a priority to pay off their debts this year, an expert has advised.

This was the tip given by Justin Modray of consumer website Candid Money, in a year when he acknowledged things will get harder for many consumers, due to a combination of headwinds such as higher taxes and spending cuts by the government and local authorities.

However, he claimed, not everything is bad news, suggesting the “likelihood” of a base rate hike by the Bank of England is “slim”.

He noted this “means families with decent variable rate mortgages should continue to enjoy low monthly payments”.

Such a claim may be regarded as contestable in the light of the increased support among the Bank’s Monetary Policy Committee for a base rate rise, with three members voting for a rise in February and the minutes noting others agreed the case for an increase has strengthened.

But whether the base rate and the cost of mortgages goes up or not, Mr Modray noted families will still face other high costs, notably credit cards.

He commented: “The high rates of interest charged by many credit cards will persist, so managing expensive debt should really be the financial priority for most households.”

Those enduring great difficulty in doing this where the level of debt is £15,000 or higher may consider individual voluntary arrangements as a means of getting these down, with creditors agreeing to accept a smaller amount to be paid back over a period of up to five years, at the end of which any remaining debt is written off.

Mr Modray’s comments come after a survey by insolvency body R3 revealed 43 per cent of consumers expect their finances to worsen in the next six months, with only 24 percent believing things will get better.