For many people it has been difficult over the past few years to decide whether to put any spare money into savings so that they have cash to emergencies or for luxuries and treats, or whether to use their spare money to pay down their mortgage and clear other debts. Of course, few of us have what can be described as ’spare’ money these days. However, for those of us that have variable rate mortgages the repayment amounts have been much lower over the past couple of years because of the rock bottom interest rates stemming from the all time low base rate of 0.5 percent.

Many homeowners with variable rate mortgage have been delighted that interest rates have remained low for the past two years. This has seen their monthly repayments plummet in some cases, leaving them with far more in the way of disposable income each month. However, there are been mixed reactions in terms of how this spare money has been used each month by those that have saved on their mortgage repayments.

Whilst it is important to have some money in savings in order to fund an emergency of in case of a job loss it is important not to focus solely on saving the money each month. Even though many believe that the interest rates could increase soon it is still worth spending however long is left in terms of lower repayments using the money to pay off some debt. Some people have used the spare cash to reduce the mortgage by overpaying on it. However, for those that have unsecured high interest debts such as credit cards and loans it may be an idea to spend as long as possible paying these off with that money.

The first thing to bear in mind is that if interest rates do rise, as is expected, then monthly repayments will also increase. For some people this could come as a financial shock, and if there are also unsecured debts to cope with this could make things very difficult. Paying off the unsecured debts means that if rates and repayments do increase the financial changes will be easier to cope with.

Also, bear in mind that the current returns on savings are very low, which means that you will save far more by paying off high interest debt than saving money in a low interest account.