A poll carried out by YouGov has shown that more than one million household in the UK have used a credit card to pay their mortgage or rent. Housing charity Shelter backed up these findings by revealing that 6 per cent of those surveyed admitted they need to use credit to meet their housing costs.
Younger people were found to be more likely to rely on credit to stay on the property ladder, with 7.5 per cent of those aged between 18 years old and 24 years old confessing they had used credit cards to meet their mortgage or rent repayments.
Those using credit to make such payments have been warned by the Housing Advice Service that they face getting themselves into a ‘spiralling maze of debt’ in which the credit available to them will eventually run out.
Housing charity Shelter have laid some of the blame at the door of irresponsible mortgage lenders, saying banks and building societies were allowing people to become financially stretched, forcing them to turn to credit to keep themselves afloat.
Chief executive of Shelter, Adam Sampson claimed the situation was appalling, he said, “The number of people hit by the credit crunch, interest rate hikes and unaffordable housing costs are rapidly rising. For many people trying to keep a roof over their head, desperation is driving them to short term, high cost borrowing. Ordinary people are being forced to seek more risky and expensive ways to stave off the threat of eviction and repossession.”
Shelter alleged that most credit card companies charged a rate of interest of between 15 per cent and 18 per cent, nearly 50 per cent more than even the highest mortgage rates of 11 to 12 per cent for people with poor credit histories.
People with poor credit ratings would typically be charged interest rates of up to 40 per cent by credit card companies, five times higher than the average mortgage rate.
Director of services at the Community Housing Advice Service, Stuart Freedman said, “There is such a 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. It leads to an ever spiralling maze of debt, and eventually the credit simply runs out.”
The findings from the research unearthed that men are fractionally more likely to use credit to meet their rent or mortgage repayments. On average, 7 per cent of men will use credit cards, compared to 6 per cent of women.
The places in the UK which are most reliant on credit are found in the Midlands and Wales, where almost one in ten households in these areas has resorted to using plastic to keep on top of rent and mortgage repayments.
As housing costs escalate further, Shelter have said it was becoming a ‘huge problem’ that was likely to become more widespread. They urged people who were struggling with their mortgage or rent to seek professional financial advice before thinking about whether to use their credit card.
