Lauren Thompson
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Increasing numbers of hard-pressed homeowners and tenants are turning to personal loans and credit cards to fund their housing costs.
More than 4 million households have taken out a personal loan or credit card to cover their mortgage or rental costs in the past year, according to a survey by comparison service Moneysupermarket.com.
Tim Moss, head of loans and debt at Moneysupermarket.com, said: "It's a very serious situation when you have people turning to a short-term solution to fund a long-term product.
"Taking out a loan specifically for a mortgage goes against lenders' rules. To be funding your mortgage repayments with a credit card that will charge you interest of over 15 per cent is not the solution in the long term.”
It is not just younger homeowners that are resorting to high-interest borrowing to meet their mortgage or rental costs - twenty per cent of people in their forties have turned to loans or credit cards to keep their heads above water, says Moneysupermarket.com.
About 1.4 million people are coming off short-term fixed rate mortgage deals this year, according to the Council of Mortgage Lenders. With the average standard variable rate now at 7.01 per cent, many borrowers have seen sharp increases in their monthly repayments.
As the cost of mortgage borrowing continues to increase, landlords are also raising rent for tenants. Lee Grandin at Landlord Mortgages says: “We expect rents to rise by 20 per cent over the next 12 months. There are less buy-to-let properties being purchased and therefore less rented accommodation available, which will keep costs high.”
Mr. Moss said that consumers should be pro-active in finding more suitable ways to meet their housing costs: "People have to start ranking what they are spending their money on. You need to rank your mortgage or rent and food at the top and work your way down from there.
"You need to look at your current account and credit card statements and work out what you are spending your money on. Prioritise your expenditure - there's no point having Sky+ if you don't have a roof over your head. You should also shop around so you aren't paying over the odds for the essentials of life such as heating, electricity, food and insurance.
"It is always a shock to people who see a debt manager when they realise how much more disposable income this strategy can produce."
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there will not be a shortage of btl properties coming to the market, these will be substituted by houses that are not selling converting to rental properties.
alan, essex,
House prices weren't taken out of inflation, only mortgage interest isn't in CPI.
In the past 10 years, the price of the biggest purchase most of us will make has soared, making us poorer by devaluing our earnings.
A true inflation target and higher interest rates would have prevented this.
W Smith, Bath,
A half-truth from Lee Grandin of 'Landord Mortgages'. The other half of the truth is that many landlords are defaulting (hence B&B's problems) because market rents do not cover mortgage costs. There is also a glut of empty properties, houses as well as new-build flats, available for rental.
Paul, Coventry,
Chris, Banbury. You are spot on.
I know someone who rents out property and surprise, surprise the only one's she can get tenents for are the cheaply priced one's!!
THERE IS NOT A SHORTAGE OF HOUSING IN THE UK!!!!
Richard, Ipswich,
Rents to rise 20 per cent. Great news. Rental payments were never taken out of inflation calculations so this should mean interest rates will rise more, causing house prices to decrease more. Landlords may make a bit more per month but their asset is getting hammered.
Edward, London,
Landlords can dream on about a 20% increase in rents. If only it were that simple. People just do not have the money. They will be defaulting on the rent just as people are defaulting on the mortgage. The dream of ever rising rents is as foolish as ever rising house prices.
Chris, Banbury,
You can and should negotiate a discount with your landlord.It is certainly a renter´s market now and a whopping 25-30% is possible for many.
Paul Sweeney, Madrid, Spain
Rents are rising?
Where is this coming from?
There are plenty of empty properties to rent.
Where are all the homeless if houses are in such short supply?
Lack of BTL purchases = rents rising?!
These are to kind of scare tatics that got into this mess that now threatens the whole economy!
Robin, MK, UK
Homeowners? You mean mortgagees or mortgage slaves, surely? Cannot see many homeOWNERS running into trouble.
PT, Tynemouth, UK
Agreed Allan, i sold my house back in Jan 07 (thank god) and have rented ever since. From the turn of the year every rental house i have looked at was once for sale, i am seeing rents come down because of all the additional houses coming on the rental market which before would have been sold.
Steve, Edgware, UK
We are only at the beginning of the biggest crash ever. Desperate measures will soon intensify until people try to walk away - flooding the market with repossession properties. As for rents rising - no sign of that near me - a last ditch bid by lettings companies to keep failing landlords on board?
Clint, Brighton, UK
No sign of rents rising. I've just negotiated a discount of 10% off my landlord - admittedly it is a 5 bed house of which many are now available to rent as unsuccessful sellers look at means to stay afloat.
Mike Livingtone, Reigate, UK
We expect rents to rise by 20 per cent over the next 12 months. There are less buy-to-let properties being purchased and therefore less rented accommodation available, which will keep costs high.
Or maybe rents will hold or drop as the btl market in most cities is saturated causing oversupply?
Le Tundoir, Liverpool, England!
Old habits are hard to break. We borrowed ourselves into the credit crisis with a little help from the banks and now we think we can borrow ourselves out of it (again with a little help from the banks).. Maybe if I borrowed at 21% from my CC for a few months I could just ride this through. GOOD LUCK
Glynn, Canada,
We expect rents to rise by 20 per cent over the next 12 months.
I feel that this quote is untrue. As property valuations fall during the present crash then so to will rents.
It is a myth to suggest that there willl be increased demand for rental property.
Allan, Inverness,
How have we come to this as as responsible adults in Britain? Why has the appearance of success clouded our judgement so? Unfortunately, our country is not just fiscally bankrupt, but morally as well. Politicians and lawmakers have not been taking due care of the population and need to be punished.
Stephen, Aberdeen,