Abolish rent & 'death grip' mortgages?

[Tony Gosling]

Credit cards used to pay mortgage or rent by 2 million people

Research by Shelter shows millions using credit 
cards in last-ditch attempt to keep roof over their heads

http://www.guardian.co.uk/money/2011/jan/06/credit-cards-pay-mortgage-rent

Jill Insley
guardian.co.uk, Thursday 6 January 2011 09.29 GMT

Paying by credit card is not a sustainable way to 
keep a roof over your head, says Shelter. 
Photograph: Jeff J Mitchell/Getty Images

More than 2 million people have used credit cards 
to pay their mortgage or rent, an increase of 
almost 50% in a year, according to the housing 
and homelessness charity Shelter.

Research for Shelter conducted in August found 
that 6% of the 2,200 questioned had used credit 
cards to meet their housing costs in the previous 
12 months. This compares to 4% in November 2009, 
and suggests a national figure of more than 2 
million people who are making desperate last 
attempts to keep a roof over their heads.

With an increased threat of unemployment and 
rising interest rates, the charity warns that 
many people will be starting the new year with 
the threat of homelessness hanging over them once 
they have exhausted the limited and expensive 
credit available to them through cards.

Campbell Robb, chief executive of Shelter, said: 
"This research brings into sharp focus how 
keeping a roof over their head has become a daily 
struggle for millions across the country. This is 
a totally unsustainable situation and one which 
we fear could see thousands more families 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. With the 
average credit card interest rate now standing at 
over 16% it is the worst possible course of 
action. Already someone faces the nightmare of 
losing their home every two minutes, and we would 
urge every single one of these people now relying 
on credit to keep their home to seek advice urgently."

Shelter has a network of advice services across 
the country which provide free advice on debt and 
housing issues, as well as a comprehensive advice 
website at shelter.org.uk/debt.
Kingsley's story

Kingsley is a self-employed electrician and 
father of four, and has been struggling to meet 
payments on a second loan secured on his family's 
home since his business slowed down with the 
recession. He used his credit card to pay December's instalment.

"I'm under no illusion that I could lose my home. 
I had a choice of making a late payment or using 
the credit card to pay the mortgage so I chose the latter.

"Last month I was doing a job, which I can finish 
within one month and which pays me £3,000. I am 
thinking that this month I'll have the money to 
pay the credit card, pay the mortgage of £368 a 
month and won't have a lot at the end of it. I'm 
hoping that next week I get a call for someone I 
priced a job for that will be £20,000 worth of work.

"If that comes off, I'll be OK until April; if it 
doesn't then I don't want to think about the consequences."

He is now considering declaring bankruptcy and starting again.
Wendy's story

"I had eight credit cards. I'm 51-years-old and 
am not daft. I never used my cards in the past, 
never had any financial problems whatsoever and 
have always had a perfect credit record. I'm a 
civil servant, have a responsible job and always maintained my outgoings.

"I'm also a single mum and have been for a while 
– my problems started when my daughter's father 
reduced his maintenance and I had a series of 
health conditions that necessitated me reducing 
my hours at work. I didn't want to but I had to.

"I also went through a very bad divorce which 
left me with legal bills of £12,000-£15,000, 
which was a horrendous amount for a single parent.

"My daughter was undergoing psychiatric help 
because of abuse she had suffered and I wanted to 
preserve her continuity of life by keeping the 
same house. So I fought very hard at the time of 
my divorce to keep the house. It's only a three-bed semi – not a mansion.

"In order to take the house over I had to prove I 
could pay the mortgage, but I ended up having to 
get a £43,000 secured loan on top of my mortgage 
to pay off solicitors fees, money I'd borrowed 
from my father and to make up the shortfall to pay off the joint mortgage.

"I had to pay £416 each month for my mortgage 
with RBS and a £627 payment for a secured loan 
with NatWest. I fought very hard for that loan 
and don't blame NatWest for giving me the loan: 
it was before my daughter's father decreased his 
maintenance and before I reduced my work hours. 
At the time I could afford it. It was 
uncomfortable but I was prepared to put up with 
six or seven years of hardship to maintain the 
house and the stability in our lives.

"But there was no flexibility and very soon I 
started to run into problems. I had a growing 
child, my boiler went wrong which cost £1,500. It 
got to the stage where the car insurance was due again and other bills accrued.

"So in the past seven or eight months I started 
to rely on drawing cash from my credit cards and 
paying it into my bank account, or phoning up and 
paying the mortgage by card over the phone. I was 
also paying for clothes for my daughter on credit card.

"You get in the habit of going to the card and 
thinking 'when things get better I'll be able to 
pay it off'. But it's the increase in the monthly 
payments. I was paying £300 a month towards all 
my credit cards. I haven't been on holiday, bought lavish clothes or a car.

"My secured loan, mortgage and credit cards come 
to £1,350 a month and I earn £2,000 a month with 
everything. It's unsustainable. I have a 
12-year-old daughter, a house to run, food to 
buy. I don't have any money left over at the end of the month.

"Two years ago my credit card balances were zero. 
I managed to pay them off by partially retiring 
at work but now I owe £14,000 again. Until 
November all of my mortgage payments were also up to date.

"I can't do overtime because of medical problems, 
and my pay has been frozen because of the civil 
service pay freeze. My daughter's father lost his 
job so has stopped paying the £300 maintenance.

"I contacted the credit card companies in October 
but the majority have never replied. I made an 
offer to pay 40% of my regular monthly payments 
for a year to allow me to get back on my feet, 
and I'm making those payments without their 
agreement. The stress of it all makes me feel 
ill. I do worry about it and it's not something I 
take lightly. I don't want anything that wipes 
the debt. It's my debt and I want to honour it. 
It's just that my circumstances at the moment mean I can't.

"I would never ever again have a credit card even 
if I was offered one. It eases your immediate 
problems but creates greater problems in long run."
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