Millions use credit cards to pay mortgages

By DAILY MAIL REPORTER
Updated: 03:19 EST, 6 January 2011

Around 2.6m Britons used cash taken out on a credit card to pay their mortgage or rent last year.

Worst outcome: Using credit cards to pay the mortgage is not advised.

A report by housing charity Shelter said many households faced 'a daily struggle' to find the money to keep a roof over their heads.

Chief executive Campbell Robb said: 'This is a totally unsustainable situation.

'It is one we fear could see thousands more pushed into the spiral of debt, eviction or repossession and ultimately homelessness. Using credit cards to pay the rent or mortgage is simply robbing Peter to pay Paul. It is the worst possible course of action.'

During 2008 and 2009, Shelter found 4% of homes relied on cards to pay mortgages or rent. Last year the figure was 6%. But withdrawing cash on a card means crippling charges.

Typically, companies levy 2.8% of the amount withdrawn, plus interest at an average of 25.6%.

A spokesman for Moneyfacts, the financial information firm, said: 'Taking out cash on a credit card should be seen as a last resort. It is an expensive way to borrow.

'If you need cash, you could look at alterative forms of borrowing such as personal loans, which currently have cheaper rates than the majority of cash rates on credit cards.'

Meanwhile, the Council of Mortgage Lenders predicts 40,000 families will have their homes repossessed this year.

›› Calculate: How much is credit card debt really costing you?