Debts & Loans

Now that interest rates have reduced significantly and those with a tracker or variable mortgage rate will be benefiting, perhaps it's time for those with other borrowings apart from their mortgage to consider consolidating their debts onto a lower rate.

For those with a number of credit commitments such as credit cards, personal loans, store cards and overdrafts - and particularly those finding their monthly costs a bit difficult to cope with - this is a good time to consider refinancing.

But this is not for everyone and by refinancing short term debt on to a longer term arrangement you will be paying more interest overall, even if the rate is lower.

The main point of the exercise, however, is to make life more affordable now and if that results in higher costs overall for some people that will be a worthwhile trade-off.

Having said that, if you can switch from credit card rates of 15 per cent to 20 per cent down to mortgage rates of four per cent or five per cent and still pay off the balances in the short term then you can definitely make a saving.

Debt consolidation remortgages are not available from every lender and some have different criteria for consolidation so it's essential to check with the lender before submitting an application. It's also important to check you don't have any penalties with your lender if you redeem your mortgage.

Some of the lowest rate remortgage deals available for debt consolidation are listed below.

A SHORT TERM TRACKER RATE



A short term tracker rate to consolidate your payments and hopefully keep them low for a couple of years is available from Cheltenham & Gloucester.

This is a tracker rate of Bank of England base rate plus 1.69 per cent until April, 2011 giving a starting rate of just 3.69 per cent. After the tracker rate ends it's followed by the standard variable rate, currently four per cent. Arrangement fee is 2.5 per cent of the loan amount but this may be added to the loan. Penalties are three per cent until April, 2010 and two per cent until April, 2011.

AN ALTERNATIVE TRACKER RATE

Another competitive tracker deal is on offer from Abbey with a rate of Bank of England base rate plus 1.99 per cent for two years giving an initial rate of 3.99 per cent.

This deal includes free legal fees and a free valuation but has a fixed booking fee of £1995 rather than a percentage of the loan. This could be useful for larger loans.

The redemption penalties last for the same time as the tracker rate and are two per cent plus £225.

The loan is portable and you can borrow up to 60 per cent of the value of the property's value.

A FIXED RATE



If you would rather know what your costs are going to be then Alliance & Leicester has a fixed rate option of 3.99 per cent until December, 2010 but unfortunately it doesn't have free legal fees or a free valuation for a remortgage.

There's an arrangement fee of £600, which is much lower than the deals above. The penalties on this deal last for the same time as the fixed rate and are three per cent plus £295.

The loan is portable and the maximum you can borrow is also 60 per cent of the value of the property.

There are thousands of deals and they change frequently so take advice about which is best for you.