Our nation of shop goers is deep in the red

Inhibited by the state of the economy and the conflict in Iraq, consumers are spending less and remortgaging rather than moving to a new home. Worryingly, though, we are not paying off our debts: outstan- ding balances on credit and store cards, overdrafts and personal loans continue to rise.

According to research from Barclays, outstanding debt on property fell in February. The housing market is showing signs of cooling, particularly in London and the South-east where the Halifax predicts that prices will rise by only 2 to 3 per cent this year. More people are choosing to remortgage rather than move house, which may be behind the Halifax's announcement last week that it is increasing the income multiples on loans. Some buyers will even be able to borrow up to six times their salary, as long as they earn £100,000 a year and have a £30,000 deposit.

But while people are jittery about the housing market, unsecured borrowing is still on the rise. In February, unsecured debt was £172m more than the £1.32bn outstanding in January.

However, while consumer confidence is falling, one way to pierce the gloom is to bring down your borrowings. Interest rates are at their lowest levels for nearly 50 years so now is a good time to consolidate debts, reducing monthly payments and helping you pay them off quicker.

The first step is to look at what is probably your biggest outgoing: your mortgage. If you are on a fixed or discounted rate, you should have a reasonable deal. But anyone on their lender's standard variable rate should think about remortgaging as they are bound to get a better deal elsewhere. Go to an independent mortgage broker, who will have a good idea of the market and the most competitive offers available.

There are also plenty of ways of reducing unsecured debt, which tends to have far higher rates of interest than a mortgage. Your first aim should be to get rid of any store cards you have, as many charge around 25 per cent interest. Outstanding balances on store and credit cards should be switched to a card charging 0 per cent interest on balance transfers for several months. This will let you chip away at the balance instead of just meeting the interest payments each month.

Egg, Tesco and RBS Advanta offer 0 per cent on balance transfers until October, while Nationwide and Virgin Money offer 0 per cent for the first six months and Sainsbury's Bank for the first five months. Ideally, your new card should offer 0 per cent on new purchases, too. Nationwide, Egg, Sainsbury's Bank and Tesco all do this.

If you think it is unlikely you will clear your balance inside the introductory period of the card, Cahoot, Morgan Stanley and Capital One all charge 7 per cent or less for the lifetime of the balance transfer.

If you don't feel you are disciplined enough to clear your debts this way, a personal loan might be a better idea because you will have to pay a set amount back each month. And while the introductory periods on credit cards last a few months, loans can be taken out for much longer.

There are plenty of good rates on personal loans available so use a broker to source the best deal. A number of websites can help you do this, saving hassle and money, such as www.moneysupermarket.com and www. moneyfacts.co.uk.

Lombard Direct is charging 6.7 per cent interest but this deal is only available via the internet. If you prefer to use the phone to arrange your loan, Northern Rock has an annual percentage rate (APR) of 7.5 per cent, while Nationwide is charging 7.9 APR.

Barclays recommends that consumers should have no more than 12 per cent of their annual salary as unsecured debt. If you do, take a serious look at your finances and get help from the Citizens Advice Bureau if necessary.