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Money saved through interest rate cut `to be used to reduce debt`

13/03/2009

The latest cut to the base rate, which took it from 1% to an all-time low of 0.5%, is unlikely to make much of a difference to most people, according to the Institute of Financial Planning (IFP).

The IFP, whose mission is `To build and maintain the profession of Financial Planning for the benefit of consumers in the UK`, has stated that people whose debts have become cheaper to service will probably use the money they save to pay off debt.

An IFP press release states: `The reduced expenditure on servicing interest payments is likely to be used to reduce debt rather than go on the spending spree that the monetary authorities are trying to encourage, in order to stimulate the UK economy`.

The IFP believes that people should take a `back to basics` approach to their finances - that they should create a budget so they can `get a firm handle on their income and expenditure`.

This is likely, it continues, `to highlight areas where they can make savings in expenditure through changing consumption patterns but also through minimising wastage from paying too much tax or charges`.

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