The UK economy appears to have finally escaped the spectra of recession, but growth remains low. The latest snapshot from the National Institute for GDP indicates a slowdown in month-on-month growth, which it said showed a “picture of continued weakness in the UK economy”. Austerity cuts, increasing energy bills, and higher fuel costs are all hitting the average UK homeowner hard.
According to Credit Action, a national financial education charity, the average household debt in the UK is £8,144 (excluding mortgages). Taking into account households with some form of unsecured loan, this figure increases to £15,661.
Credit Action figures also show that every day in the UK 1,392 people will be made redundant and 337 will be declared insolvent or bankrupt.
The Citizens Advice Bureau deals with, on average, 8,004 new debt problems every working day in England and Wales. The organization also states that average consumer borrowing, in various forms, has significantly increased, the average being £4,350 per UK adult, as of the end of March 2011.
Much of this unsecured debt is made up of credit cards or unsecured loans, which may be at extremely high-interest rate levels. For homeowners who find themselves in this position, it may be that much more favorable remortgage rates could be available; allowing them to raise finance to repay existing unsecured debts.
This option has the added advantage of enabling all debts to be consolidated into one monthly payment, makes for much clearer budgeting, will cut down on the clutter of credit card bills, unsecured loan repayment letters, and the like, and could also lower the amount of your monthly debt payment. Perhaps you have taken a pay cut at work or are struggling to cope with the widely publicized rising cost of living in the UK.
You could therefore be looking to lower your debt outgoings for the time being and increase payments once your circumstances improve. Remortgaging, to consolidate your debts will lock a variety of repayment rates into one fixed rate, which again gives much more clarity to you as a borrower.
It is important to speak to a remortgage professional before acting because detailed calculations would have to be made. It may be preferable to pay off the consolidated aspect of the loan sooner rather than over the entire mortgage term, something that can be achieved via a mortgage that allows overpayments.
If your personal finances are particularly poor, there may only be a limited number of remortgage rates available to choose from, however, there is no reason to despair, as there are some lenders who specialize in these types of mortgages.
Raising finance through remortgaging, to consolidate existing unsecured loans, in the current difficult economic climate may therefore be a great option for the many homeowners who find themselves in the difficult position we have been discussing here.