More than 1m householders have had to use a credit card for rent payments or mortgage repayments in the last 12 months, according to the data published today by housing charity Shelter*.
Shelter found that a credit card had been used by 6% of all UK residents making regular housing or mortgage payments. As there are approximately 17.3m householders in the UK paying rent or mortgage repayments**, Shelter has concluded that just over 1m is the relevant national figure.
This expensive payment method is likely to have been a last resort for most mortgage holders, which also indicates that they may already be struggling with their personal finances.
In that case, making mortgage repayments ‘on the plastic’ is extremely risky, as credit card companies are not subject to the same rules as mortgage lenders, and can obtain a ‘charging order’ from the courts to force defaulters to sell their home.
A ‘charging order’ transforms credit card debt, which is an unsecured loan not attached to any concrete asset or property, into a secured loan with your home as the security.
Once the charging order is obtained, a credit card company can than move on to obtain a possession order that forces a homeowner to sell their home and repay their credit card debt.
While cases of actual repossessions are still relatively rare, data from Citizens Advice showed that in the period from 2000 to 2008, the use of charging orders to recover debt increased by over 7 times, and that around three-quarters of applications for charging orders are approved by the courts.
*Source: YouGov poll for Shelter published January 2010 covered 2022 adults in the UK
**Source: Survey of English Housing/Scottish House Condition Survey/Living in Wales (Welsh Assembly)
