Switch to a better mortgage deal
A mortgage is usually your biggest single monthly outgoing, so make sure you are not paying more than you need to in interest. A recent survey carried out by moneysupermarket.com found that more than a quarter of homeowners admitted to being worried about the effect of rising interest rates on their mortgages.
After all, a homeowner paying just the interest on a £150,000 mortgage priced at the lowest standard variable rate (SVR) on the market of 2.5% would currently pay just £312.50 a month to their lender. But if interest rates increased back up to their more long-term norm of 5% (a level last seen in October 2008), SVRs could reach 7% which would see this monthly payments rise to a staggering £875.
If you are worried about interest rates rising this year, remortgage to a fix now while deals are still cheap. For example, if you can lay your hands on a 40% deposit, Santander is offering a rate of just 2.65% until February 2013 – though the fee is a fairly hefty £1,995.
Even if you want need to fix your rate, there are plenty of other competitive options. If you are not tied into your current mortgage, consider First Direct’s new two-year tracker deal which launches on 23 December.
At 1.49% above base rate, which gives a current payable rate of 1.99%, in return for a £99 fee and 35% deposit, it is the cheapest deal the bank has ever offered. Even if you have early redemption charges to pay, making a switch like this could still be financially worthwhile – but you will have to do your sums.
Clear out your standing orders and direct debits
When is the last time you went through your current account with a fine tooth comb? Make the start of the New Year the time to clear out any unnecessary direct debits and standing orders. For example, a magazine subscription, unnecessary insurances – such as for your mobile phone which is often covered under your home contents policy – and even fees for clubs or gyms that you no longer attend.
If you have a fee-paying current account, make sure you are not doubling up on the services it offers – for example, breakdown cover or gadget insurance. If you find you are, cancel standalone insurance policies or consider downgrading your bank account to a plain standard option which doesn’t make a monthly charge.
Switch your credit card balance to a 0% deal
Christmas is expensive enough without having existing debts festering on a credit card that charges sky high rates of interest. If you can’t pay off your balance, let New Year be the trigger to switch them to a 0% deal.
The best credit card for this purpose on the market is currently the Barclaycard Platinum balance transfer card, offering a leading 17 months at 0% on any balance you move across. New customers who apply through moneysupermarket.com will recieve a £20 refund on the 2.9% balance transfer fee.
Once the 17 months is up, you'll pay a typical annual percentage rate (APR) of 16.9%, so you should aim to clear the balance before that kicks in.
Once you have clawed back all the extra monthly money you can, it can be used to either pay down your debt or build up your savings. Either way, it will mean 2011 should be a better year financially than the last.