Desperation driving homeowners to credit cards

Posted 2007-11-7

Some mortgage holders have been using credit cards to meet their monthly repayment requirements. Approximately 7% of men and 6% of women have used a credit card to cover a mortgage payment, according to research conducted by homeless charity, Shelter.


Unfortunately, this practice is almost certain to put borrowers further in debt, as credit card interest rates can be 50% higher than typical mortgage rates.

“Desperation is driving them to short-term, high-cost borrowing. Ordinary people are being forced to seek more risky and expensive ways to stave off the threat of eviction,” said Chief Executive, Adam Sampson.

Credit Action emphasizes these short-term, knee-jerk reactions could prove to be far more costly in the long-term; with the average annual interest costs per person being £3,725, in August 2007.

The UK mortgage market is one of the most innovative in the world. Unlike other countries there is no intervention by the state or state funded entities, and borrowing is funded by either mutual organisations (building societies and credit unions) or proprietary lenders - typically banks. Since 1982, when the market was greatly deregulated, there has been substantial innovation and diversification of strategies employed by lenders to attract borrowers. This has led to a wide range of mortgage products available to borrowers.

Individuals currently in desperation are strongly recommended to seek the financial guidance of a mortgage professional to remedy their financial woes. By obtaining any one of several types of home loans available, some of the equity held in property could be released.

Instead of attempting to tackle financial hardships in a piece-meal way, looking at an individual’s finances as a whole, will allow financial problems to be more easily, and less expensively, managed.

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