More than two million people have used credit cards to pay their mortgage or rent, an increase of almost 50 per cent in a year, Shelter research revealed yesterday.
‘This is a totally unsustainable situation and one which we fear could see thousands more families pushed into the spiral of debt, eviction or repossession and ultimately homelessness’, warned Shelter’s Chief Executive Campbell Robb.
A YouGov poll in August 2010 asked 2,234 people in the UK if they had borrowed money on their credit card to pay their rent or mortgage in the last 12 months.
Six per cent of respondents said ‘yes’, compared to just four per cent in November 2009, suggesting a national figure of over two million people.
Shelter stressed: ‘Many of these people could be starting the New Year facing the risk of homelessness.
‘Not only can defaulting on credit card payments lead to repossession in very severe cases, but just one single thing – like a bout of illness, a rent increase or drop in income – is all that’s needed to push people into a spiral of debt and arrears that can lead to the loss of their home.’
Shelter is urging anyone using credit cards in this way to get advice on how to manage their debts.
Robb added: ‘Our research brings into sharp focus the daily struggle faced by millions of people across the country to keep a roof over their head.
‘It’s vital that every single person using credit cards in this way takes action to get themselves out of debt and seeks urgent advice from organisations like Shelter, to ensure they don’t lose their home.’
Martin Lewis of MoneySavingExpert.com said: ‘For all but the seriously financially savvy, using credit cards to pay rent or mortgages is a mistake.
‘After all, you’re simply paying off one debt with another and that isn’t any type of solution.’
The Shelter warning came as Income Data Services reported that the median wage rise climbed to 2.2 per cent in the three months to November, less than half the 4.7 per cent Retail Price Index, which measures inflation.
The median public sector pay increase over 2010 as a whole came in at just 0.75 per cent, compared with a rise of 2 per cent for private sector workers over the same period.
Ken Mulkearn, editor of IDS Pay Report, said: ‘The increase in the cost of living, especially after rail fare rises, and the increase in VAT to 20 per cent, means that most employees’ pay will be chasing inflation.
‘In the public sector, the government’s pay freeze policy means that staff salaries there will fall even further in real terms.’
