MONEY MATTERS: Best to save or cut debt?

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Should we save or pay off our credit cards?

A survey by Dutch-owned bank ING Direct showed that nearly five million people managed to pay down their borrowing by using their savings, with an 18-month low on people taking out loans.

I would always opt to pay off debt first.

l Where to save without penalties for withdrawing: Banks have had to recalculate the interest they offer savers, as it is no longer viable to offer three percent on savings accounts. However, they need investors to boost their annual balance sheets. This has happened since National Savings & Investments’ index-linked certificates were reintroduced in May.

The Post Office is paying more interest on instant-access accounts than on notice accounts.

If you open a Post Office Reward Saver account, the interest is set at 2.75 per cent, but you have to give 30 days’ notice to withdraw any money.

If you open an online saver account, you get 3.01 per cent. £1 will open the account, and you have instant access to your money.

This means you would earn £301 in interest annually on a balance of £10,000 before tax which is £26 more than you would earn on a Reward Saver account.

A good deal you may like to look at is the two-year ISA 3.75 per cent deal the Post Office offers savers, but you have to lock your savings away for 24 months.

If the Bank of England does raise the base rate by the fraction expected, savings rates would not increase until nearer the end of the year 2013.

Is it a good time to move house?

According to Connells, property valuations during July rose by nearly 47 per cent compared to last July.

Compared to last month, there was a drop of 18 per cent smaller than the 23 per cent drop during the same period last year.

Data provider Money Facts show the average two-year fixed rate mortgage stands at 4.28 per cent today, the lowest level since it began recording costs in 1988.

Are log book loans a good idea?

Log book loans are loans against the money locked up in your car they are notoriously expensive, interest rates are very high and in excess of 600 per cent.

You retain possession of the vehicle but you sign over the V5 logbook to the lender giving temporary ownership until the debt is repaid.

Citizens Advice says a mother of two took out a £500 loan after her husband lost his job, saw her loan grow to £1,500, and her car is worth less than £2,000.

l Readers’ questions I haven’t included here I have responded to directly.