Saving deemed less cost effective than paying down debt

Wed, 01 Feb 2012

It is more cost-effective for people to pay down their debt rather than attempting to save money, it has been suggested.

Paula John, editor-in-chief at Your Mortgage, claimed it makes no sense for individuals to keep putting cash into a savings account when it could be used to settle arrears instead.

The industry figure explained paying back money owed is more beneficial from a financial perspective than placing cash to one side, as the logic in the latter approach simply "doesn't add up".

Ms John was speaking in response to findings from First Direct that showed there are twice as many mortgage holders saving regularly than there are those who choose to overpay their home loan .

She said it is concerning to learn so many people are unaware of their mortgage arrangements, but noted an increasing number have started overpaying on their deals in the last few years.

"People who can afford it and have got spare cash, have been taking advantage of overpayments because interest rates are very low," the expert went on to point out.
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