Around an extra 100,000 homeowners are benefitting from the lowest interest rates in history, as their mortgage debt management is eased following the end of a fixed-rate term.

According to the Council of Mortgage Lenders (CML), 42% of existing mortgage-holders are still enjoying a fixed rate deal.

For those whose introductory rate has come to an end, usually after a two- or three-year fixed rate arrangement, they will have switched onto the lender’s standard variable rate (SVR).

Whilst normally, this would strain the debt management of many households fortunately 100,000 people a month are now enjoying some of the lowest ever SVRs.

CML figures revealed that for those people able to secure a mortgage, home loans have been at their most affordable since March 2004.

Mortgage borrowers in July were only spending an average 12.7% of their income on interest payments, compared with 18.1% for loans secured a year earlier, making the debt management of their mortgage far easier.

However, as interest rates rise and with news that household energy bills may increase to around £2,000 a year the finances in many homes may be stretched to the limit causing serious debt problems for the ill-prepared.

Ivan Cooper, Chairman at debt advice organisation Chiltern, said: “We are enjoying historically low interest rates at the minute but these won’t last forever.

“As soon as anyone feels they may not be able to maintain any credit payments they should seek impartial debt advice from a reputable debt help provider – as there are always more options to get out of debt the earlier action is taken.”

Reputable debt help providers include The Debt People, Hamilton Locke and Chiltern – who all offer free debt advice.

In many circumstances they will be able to relieve debt problems by providing simple budgeting and debt advice, however in some cases a professional debt solution may be necessary.

Professional solutions include Debt Management Plans (DMPs), Individual Voluntary Arrangements (IVAs) and Trust Deeds.

If a professional debt help solution is recommended, following initial debt advice, the amount that you have available to repay towards your unsecured balances will be calculated. This involves working out your household income and then taking away your monthly living costs – i.e. rent/mortgage, food, travel to work, council tax etc.

The remaining amount is classed as your “disposable income”, and is a realistic reflection of how much you can afford to repay towards the people you owe money to.

With professional solutions, like a debt management plan or IVA, this disposable income is paid to the debt help provider who then distributes it amongst your creditors on a pro rata basis.

This makes managing your outstanding unsecured balances easier, as you only need to make one payment each month which covers all of your accounts.

On a debt management plan, payments towards your debts are rescheduled over a longer period of time to make them more affordable. Debt management plans are flexible and informal – which means that if your income drops your monthly payment can be changed to reflect that. Likewise, if your situation improves you can increase your monthly payment and repay balances in a shorter period of time. Debt management plans can be used as and when required, as there is no legally binding contract involved. So when you no longer need your debt management plan it can be cancelled. Your debt help provider will also try to negotiate reduced or frozen interest and charges on your accounts, to reduce the overall amount owed.

An Individual Voluntary Arrangement (IVA) works in much the same way, as all outstanding unsecured balances (personal loans, overdrafts, store cards, catalogues, credit card debts etc) are gathered into a single monthly payment – which is paid and distributed by your debt help provider.

However with an IVA, a legally binding contract is drafted by a qualified insolvency practitioner – who will provide debt and IVA advice throughout the IVA term. This contract ensures that you are protected from your creditors changing their payment demands or terms to the agreement. As long as payments towards the IVA are maintained, you cannot have any further legal action taken against you – so you can’t be made bankrupt or face court proceedings.

With IVAs, debts are repaid over a fixed period of time (typically within five years), after which time all remaining unsecured balances are written off. Plus, once the IVA has been agreed all further interest and charges will stop being added to your accounts.

Trust Deeds are effectively the same as an IVA, but for people living in Scotland. These are also repaid over a fixed period of time, but this is usually within three years.

With debt management plans, trust deeds and IVAs, contact with creditors is done via your debt help provider – so demand letters and calls from creditors should stop.

For immediate debt advice, or for further information on debt management plans and IVAs, please call the number at the top of this page.