Using credit cards to cover mortgage payments is a really bad idea
A new survey has resulted in shock among many UK debt charities and financial advisers as it seems to show a massive increase in irresponsible financial behaviour.
Specifically, the study for the Housing charity Shelter suggests that up to one million households have borrowed money on a credit card to pay their mortgage or rent over the past year, a charity’s study suggests.
Shelter said this figure represented 6% of UK homes and that people in lower social groups had been most likely to need to use their credit cards, but that the middle classes had also been affected.
The charity said the figure was a “shocking discovery”. Its survey questioned 2,022 people.
Shelter said it urged people who were struggling to keep up with their housing costs to urgently seek expert advice.
“If people are already struggling to the extent that they fear losing their home, increasing credit card debt cannot be the answer,” said Kay Boycott, Shelter’s director of policy and campaigns.
Its survey suggested that for lower social groups, the number of people resorting to using their credit cards over the past 12 months rose to 8%, while the figure for middle class people totalled 4%.
Shelter said many people who had resorted to using their credit cards were now at risk of becoming homeless, as in some cases defaulting on their credit card repayments might lead to their homes being repossessed.
Last year, Citizens Advice reported that some lenders were increasingly going to court to obtain a charging order, which secures a previously unsecured debt on the borrower’s property.
While cases of actual repossessions following this were rare, such a move would make it possible for a lender to ask a court to order the sale of a property to recover a debt.
Citizens Advice found that since 2000 there had been a 722% rise in the number of charging order applications by unsecured creditors. The charity also found that 74% of the 132,000 applications in 2007 resulted in charging orders being made.
Financial advisers and charities such as Shelter all state that anyone who finds themselves in financial trouble should seek help at the earliest possible opportunity. This can be from either an independent adviser or their creditors, many of whom are now legally obliged to offer some form of help.
Turning to credit card debt to keep up with mortgage payments is only compounding an already serious problem. It also makes house repossession more likely, not less.
