Households paying mortgages with credit cards

Spartacus_Mills

http://news.bbc.co.uk/1/hi/business/8450518.stm

Many homes 'using credit cards to pay mortgage'













Up to one million households have borrowed money on a credit card to pay their mortgage or rent over the past year, a charity's study suggests. Housing charity Shelter said this figure represented 6% of UK homes.
Shelter said people in lower social groups had been most likely to need to use their credit cards, but that the middle classes had also been affected.
The charity said the figure was a "shocking discovery". Its survey questioned 2,022 people.

Seek advice
Shelter said many people who had resorted to using their credit cards were now at risk of becoming homeless, as defaulting on their credit card repayments could lead to their homes being repossessed in the worst-case scenario.
Instead it urged people who were struggling to keep up with their housing costs to urgently seek expert advice.
"If people are already struggling to the extent that they fear losing their home, increasing credit card debt cannot be the answer," said Kay Boycott, Shelter's director of policy and campaigns.
Its survey suggested that for lower social groups, the number of people resorting to using their credit cards over the past 12 months rose to 8%, while the figure for middle class people totalled 4%.

I wonder if this will get worse as interest rates go up.

Does anyone know what the long term average/trend is. Is this normal or is it something we should be worried about. Credit card debt is not a problem as long as you use it as free money and pay it back. The article is interesting, and bearish in sentiment, but does not say how many people pay it back 100% when due.

Really2

Shelter said many people who had resorted to using their credit cards were now at risk of becoming homeless, as defaulting on their credit card repayments could lead to their homes being repossessed in the worst-case scenario.

I thought credit cards were unsecured lending?

Also I thought you were not aloud to use a CC to pay a bill?

So how do people get round it? withdraw the cash?

tomterm8

Really2 wrote: »

I thought credit cards were unsecured lending?

Process is, default on a credit card, get a court order, lose, creditor applies for a charging order, lose, debt is now secured on house, get an installment order you can't pay, don't pay it, your house can be reposessed by court order.

BTW, anyone paying 16% interest plus a 2% cash fee to repay a 6% interest debt... well, meh. Doesn't bear thinking about.

Harry_Powell

From what I've read on the MFW board, a lot of people use 'mule' cards to transfer cash from interest free credit cards and then use this cash to offset their mortgages. Once the interest free period is over, they either move to another card or they pay back the cash.

Credit card companies have gotten wise to this, hence the 2.5% balance transfer charge, but even at 2.5% it's cheaper than paying the usual 4% to 6% people are paying on their mortgages right now.

I'm still looking into this to see if it's a worthwhile thing to do, but I'm so slap-dash that I just know I'll forget to make a minimum ayment or something and get hit with a huge charge, wiping out any potential savings.

Mr.Brown_4

Harry_Powell wrote: »

Once the interest free period is over, they either move to another card or they pay back the cash.

Well, that's the plan anyway!

Harry_Powell

Mr.Brown wrote: »

Well, that's the plan anyway!

I'd imagine it'd be quite difficult to do if someone had been 'stoozing' for a long time - you'd start thinking that money was yours and wouldn't want to give it back

I do like the idea of it though, getting one over the banks, etc. If your mortgage was with Northern Rock, it'd be like a modern day version of Robin Hood. Stealing from the rich (credit card companies) and giving to the poor (Nothern Rock).

chucky

Harry_Powell wrote: »

I'd imagine it'd be quite difficult to do if someone had been 'stoozing' for a long time - you'd start thinking that money was yours and wouldn't want to give it back

I do like the idea of it though, getting one over the banks, etc. If your mortgage was with Northern Rock, it'd be like a modern day version of Robin Hood. Stealing from the rich (credit card companies) and giving to the poor (Nothern Rock).

only worth it if you can get them to not charge the fee or you can get them to give you anything over 12 months. the virgin one was good last year (15 months 0%) and i think they may be doing the same thing again now.

always good for offset mortgages.

lemonjelly

Really2 wrote: »

I thought credit cards were unsecured lending?

Also I thought you were not aloud to use a CC to pay a bill?

So how do people get round it? withdraw the cash?

Yes you can do the above. I tis actually more commonplace than most are probably aware of. I've argued for quite some time that a lot of people I see are utilising credit in order to sustain ongoing living costs. CC's I've seen have covered rent, mortgages, council tax, all sorts of utilities bills, and so on...

This is why, when the so-called "crunch" occurred I anticipated that there would really be a struggle on for some households, as they had, for some time been sustaining the running costs of their home/household on credit. With credit less available/accessible, I felt there would be a struggle for some to meet their ongoing liabilities.

It still hasn't hit home with the severity I anticipated, but there is time. I still expect the levels of secured & unsecured defaults to increase by some margin, & the courts to become very busy dealing with creditors.

tomterm8 wrote: »

Process is, default on a credit card, get a court order, lose, creditor applies for a charging order, lose, debt is now secured on house, get an installment order you can't pay, don't pay it, your house can be reposessed by court order.

BTW, anyone paying 16% interest plus a 2% cash fee to repay a 6% interest debt... well, meh. Doesn't bear thinking about.

Yes. Thing is, don't pay mortgage leads to homelessness. Don't pay Credit card leads to CCJ. Big difference there!

In debt work, you look at the priority creditors (rent/mortgage, c tax, magistrate court fines etc) before you look at unsecured lenders who can effectively go whistle...

I have had to advise people to go to access credit, for example to claer c tax arrears, or rent/mortgage arrears to prevent the situation become a lot worse. Unsecured lenders are easier to deal with, as they have less severe powers of enforcement.

tomterm8

lemonjelly wrote: »

Yes you can do the above. I tis actually more commonplace than most are probably aware of. I've argued for quite some time that a lot of people I see are utilising credit in order to sustain ongoing living costs. CC's I've seen have covered rent, mortgages, council tax, all sorts of utilities bills, and so on...

This is why, when the so-called "crunch" occurred I anticipated that there would really be a struggle on for some households, as they had, for some time been sustaining the running costs of their home/household on credit. With credit less available/accessible, I felt there would be a struggle for some to meet their ongoing liabilities.

It still hasn't hit home with the severity I anticipated, but there is time. I still expect the levels of secured & unsecured defaults to increase by some margin, & the courts to become very busy dealing with creditors.



Yes. Thing is, don't pay mortgage leads to homelessness. Don't pay Credit card leads to CCJ. Big difference there!

Actually, don't pay credit card leads to CCJ, which can also lead to homelessness. Don't pay credit cards leads to a spiral, where any access to credit becomes very much more expensive. If you have borrowed more than £750, the reality is the credit card company can foreclose on you if you don't pay. And, ultimatly they will do so if they can see equity in your home.

When you get to the point of not being able to pay your mortgage without borrowing the money from a credit card, you are on a very quick trip to homelessness unless you can change something fast to increase your income or reduce your expenditure. Because the credit card companys will cut you off, just like that, without warning.

And, ultimatly, if you have equity in your home it is very possible for a creditor to get a charging order and reposess it. The difference between unsecured and secured credit is a lot less than it used to be. The only real difference is a couple of court orders, which courts tend to grant.

lemonjelly

tomterm8 wrote: »

Actually, don't pay credit card leads to CCJ, which can also lead to homelessness. Don't pay credit cards leads to a spiral, where any access to credit becomes very much more expensive. If you have borrowed more than £750, the reality is the credit card company can foreclose on you if you don't pay the credit card company.

When you get to the point of not being able to pay your mortgage without borrowing the money from a credit card, you are on a very quick trip to homelessness unless you can change something fast to increase your income or reduce your expenditure. Because the credit card companys will cut you off, just like that, without warning.

And, ultimatly, if you have equity in your home it is very possible for a creditor to get a charging order and reposess it. The difference between unsecured and secured credit is a lot less than it used to be. The only real difference is a couple of court orders, which courts tend to grant.

Point partially taken. However, sometimes it is more practical to deal with the emergency first (I assume you'd appreciate that most don't access help in the earlier stages), & then deal with the unsecured lenders later.

The route to a charging order is quite a long one, & there are generally ways & means to avoid that happening.

The idea is to protect the client as best as practically possible, whilst giving them options & skills to alleviate the problem themselves.

tomterm8

Yep, what I am trying to get accross is the fact that if anyone gets to this point, they must take immediate advice from someone like the national debt line, and immediate action, because they are at the edge of a cliff.

I don't doubt in the short term, it may be the way to go, but it's very dangerous.