More than one million people in the UK have paid their mortgage repayments or rent by using a credit card in the last 12 months, housing charity Shelter has found.
In order to keep their footing on the housing ladder, desperate householders who are struggling to meet repayments or rent obligations are turning to plastic to pay their housing costs – of the 17 million UK homes paying mortgages or rent, 1,020,000 have used their card at least once in the past year.
The research was carried out in the wake of rising interest rates and the Northern Rock crisis to see how people were managing with the rising costs of repaying a mortgage.
Young people, including fist time buyers, are especially susceptible, with a growing
number turning to their credit cards as a last resort – almost 7.5 per cent of those aged 18-24 admitted to doing so.
Shelter chief executive Adam Sampson described the results as shocking, and added: “The number of people hit by the credit crunch, interest rate hikes and unaffordable housing costs are rapidly rising. Ordinary people are being forced to seek more risky and expensive ways to stave off the threat of eviction and repossession.”
Irresponsible lenders are partly to blame, but cannot be held solely responsible, says Heather Keats, Director of Community Money Advice, because “If someone is making minimum payments on their credit card and they have four or five cards, when they are credit checked they don’t look like a bad risk because companies don’t have the whole picture.”
Using credit to pay mortgages means that people are paying more interest than on their mortgage – most credit cards have an interest rate of 15-18 per cent – considerably more than the highest mortgage interest rates in the sub-prime sector (about 11-12 per cent). Those with bad credit could be paying up to 40 per cent interest on the money they borrow with credit cards than on their mortgage.
“There is such pressure on people’s budgets that paying your mortgage or rent by credit card, then paying that card with another card is becoming the norm for many people” explains Stuart Freeman, director of services at Community Housing Advice Service, which offers advice on housing and debt. “It leads to an ever spiralling maze of debt, and eventually the credit simply runs out.”
Malcolm Hurlston, chairman of the Consumer Credit Counseling Service, has warned of more desperate times to come as housing becomes increasingly unaffordable and fixed-rate mortgage deals come to an end.
For people who struggling with mortgage repayments, CreditExpert
, an online credit monitoring and identity fraud protection service, recommends speaking to the lender, getting advice from a source such as the Citizens Advice Bureau, budgeting, consolidating existing debts, and getting a credit report to see a clear description of each debt.
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