Credit 'used for rent or mortgage'
Published 04/01/2012 | 00:12
One in seven Britons has turned to credit such as a payday loan or unauthorised overdraft to help cover their rent or mortgage in the last year, a study from Shelter has found, as the charity warned that relying on such methods could lead to people losing their homes.
Shelter urged those sinking into a "spiral of debt" to seek immediate help after finding that one in seven people has used a payday loan, dipped into an unauthorised overdraft, or used another type of loan or credit cards to cover their rent or mortgage in the last 12 months.
This proportion equates to almost seven million people when projected on a national scale, the charity said.
Specifically looking at payday loans, the charity also found that 2% of people have used at least one payday loan to fund their rent or mortgage in the last year, equating to almost one million people nationally. It said such loans, which are intended for short-term use and can charge as much as 4,000% APR in some cases, are an "unsustainable" way of paying for housing.
Campbell Robb, chief executive of Shelter, said: "These shocking findings show the extent to which millions of households across the country are desperately struggling to keep their home.
"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."
John Lamidey, chief executive of the Consumer Finance Association, later said that it would be "simply impossible" for someone to use payday loans to pay off their rent or mortgage.
He said: "They are loans for a short period of time, typically a month. If somebody applies for a loan and it was discovered they are in arrears with a mortgage we would not lend and we would steer them to the debt advice agencies."
Housing Minister Grant Shapps said: "The sheer scale of the global slowdown has left many hard-working families struggling to make ends meet. So I'd urge anyone who is getting into difficulty to seek help in getting their finances back on track.
"Assistance can be sought by searching online for the Government's Mortgage Help website or by visiting organisations who can provide free, independent guidance such as Citizens Advice. The quicker households act to get help, the more options they will have available to them."