Money News

One million Brits rely on credit to pay for home

Wednesday 4 January, 2012

By Martin Fagan

Soaring cost of living drives people to take out payday loans to cover rent or mortgage, says Shelter.

Almost one million people have taken out a payday loan to help pay their rent or mortgage in the last 12 months, according to a new survey by Shelter.

The housing charity’s survey also revealed almost seven million people are relying on some form of credit to help pay their housing costs, using unauthorised overdrafts, payday loans, other loans or credit cards.

However, for many, Christmas indulgences will be paid for by raiding the savings account or - more likely - going into the red on credit cards and overdrafts.

The results show the spiral of debt that people are falling into in order to keep a roof over their head, with the financial squeeze facing Brits who are being pushed into debt by soaring household bills, rising taxes, measly pay rises or pay freezes.

Household bills - particularly energy - are set to rise further in 2012, which could push people further into debt. For people who are already struggling with their housing costs, Shelter is warning that the new year could bring with it a risk of homelessness.

“These shocking findings show the extent to which millions of households across the country are desperately struggling to keep their home,” said Campbell Robb, Shelter’s chief executive.

“Turning to short-term payday loans to help pay for the cost of housing is totally unsustainable. It can quickly lead to debts snowballing out of control and can lead to eviction or repossession and ultimately homelessness.

“Every two minutes someone in Britain faces the nightmare of losing their home. We urge every single one of these people now relying on credit to help pay their rent or mortgage to urgently seek advice.”

Payday loans are a recent import from the USA, where small amounts of money are borrowed for a short period at a high rate of interest to tide the borrower over until their next payday, hence the name.

However, late last year consumer watchdog Which? said the payday loans market was “rife with poor practice” and the loans themselves were “designed to trap [the borrower] in a cycle of debt”.

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