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People 'taking steps to cut debt'

By Sarah Engle, Thu 7 Jan 2010 - Published in Loans

Consumers are using low interest rates to reduce the amount of debt they have, according to an expert.

Figures released by the Bank of England show that consumers paid back a total of £379 million of debt in November, after credit card lending rose by £0.2 billion but other loans and advances dropped by £0.6 billion.

Ed Bowsher, head of consumer finance at lovemoney.com, said that the Bank's historically-low base rate of 0.5 per cent is providing people with an incentive to tackle their debts.

"People are focusing on paying down debt rather than saving because the rates you will get on your savings accounts are so low at the moment people think it is better to pay off debt," he explained.

The expert also stressed the importance of consumers reducing the amount of money they owe, recommending that they pay it off as soon as possible, even if it is held on products such as zero per cent interest credit cards.

According to CreditAction, the average household debt in the UK, including mortgages, stands at £57,888, while the average adult owes £30,226.