More competitive finance deals could save thousands in 2011, money experts believe

Reviewing finances in 2011 and switching to more competitive deals could result in savings of £3,600, it is claimed.

Despite over a third of Brits feeling they cannot make any savings in areas such as credit cards, home insurance and mortgages, research from moneysupermarket.com has found on average, people could save thousands of pounds over the next 12 months by switching to a better deal which suits their individual needs.

‘Many people will be setting resolutions for themselves as we head into 2011. At a time when we are all feeling the pinch on our wallets, especially with the increase in VAT from January 1, one resolution that should remain top of your list is to take some time out to review your finances,’ said Kevin Mountford, head of banking at moneysupermarket.

‘It is easy to make the mistake of sitting on average products which do not give a good rate of return or cost far more than they need to. Significant savings can be made by switching to a better deal and you may find that it could be the best resolution you have ever made. These savings don’t even require a change of lifestyle, but simply requires a few minutes of research to check what deal you are currently being offered, comparing to other products and changing to a more competitive deal if necessary,’ he explained.

As mortgages are the biggest single financial commitment that consumers make homeowners should ensure they are getting the best deal possible. Mountford says that even a small difference in rate can greatly affect the overall monthly mortgage payment. For example, switching a £150,000 mortgage from the average standard variable rate (SVR) of 4.74% to the market leading two year fixed rate from Santander at 2.65% would save £2,040 annually.

Although savers had a tough year in 2010 with low interest rates and high inflation giving little return on their money, switching from an easy account paying the average rate of 0.74% to Northern Rock’s easy access account offering 3% could generate an extra £226 of interest based on a savings pot of £10,000.

The personal loan market has seen renewed competition over the past few months with average rates falling, so for consumers looking to borrow over £7,000 it pays to shop around, he points out. Swapping a £7,000 five year loan at an average rate of 11.68% to the Alliance & Leicester loan at 8.7% would generate an annual saving of £112.40.

Switching your current account provider to one that pays a good rate of interest could earn you some additional cash. The Santander In Credit current account pays interest of 5% on credit balances. Keeping a £1,500 balance in this account for 12 months would earn £65.25 in interest. However, if you use an overdraft every month, you could save £253.80 by switching from an account with an average overdraft rate of 16.92% to the Santander Preferred Overdraft Account at 0% for 12 months.

Moneysupermarket also says savings can be made on credit cards with a balance transfer. By switching £2,000 worth of debt on a card with an average APR of 17.32% to the market leading Virgin Credit Card, there would be no interest to pay in the first year. This would amount to an annual saving of £301.85 taking into account the balance transfer fee.