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Millions turn to credit amid rising costs

03/07/2008

Rising mortgage and rent costs have forced 1.8 million households to take out a loan in the past year, a survey has shown.

The poll for moneysupermarket.com has found seven per cent of householders have taken out a loan to keep a roof over their heads, while nine per cent – 2.3 million – have had to spend far more on their credit cards.

Rising bills, mortgage and rental costs are leading some further into debt, the comparison website said. Some 20 per cent of people in their forties have been forced to turn to loans or credit cards to keep their heads above water.

The situation is likely to get worse this month, as £30 billion worth of mortgage deals are coming to an end in July.

Tim Moss, head of loans and debt at moneysupermarket.com, said: "It's a very serious situation when you have people turning to a short-term solution to fund a long-term product.

"Having a roof over your head has to be your top priority but to be funding that with a loan you might default on or with a credit card that will eventually charge you interest of over 15 per cent isn't the solution in the long term.

"Approximately 4.1 million households have fallen into this trap in the past year - and it needs to be remembered that taking out a loan specifically for a mortgage goes against lenders' rules."

Moneysupermarket.com suggests cutting back on luxuries while shopping around for a better deal on essentials such as utilities and insurance.

Mr Moss added: "As well as saving money, you need to look at ways of making money. A house is a tremendous asset so can you rent out a room or house share? Is your current account one that pays interest so any money you do have is at least working for you?"