Mortgage rates are on the rise again, and many of you home owners are struggling to keep pace with the growing cost of your mortgages.
More than 1 million of us are now using high-interest credit cards to cover our mortgage or rent payments, debt experts say, thus leaving us at risk of eviction or repossession.
Over 6% of us have turned to plastic to pay for the roof over our heads during the past year, according to the housing charity Shelter.
It appears that for many of us using our credit cards has become the last resort although clearly this is a dangerous tactic especially as many credit card companies charge interest between 15% and 18%; up to three times higher than typical mortgage rates, and almost 50% higher than sub-prime mortgage interest rates of 11% or 12%.
For those with poor credit ratings, credit card interest can hit up to 40% which is five times the average mortgage rate!
It appears that the youngest homeowners are the ones that are really struggling: nearly 8% of those aged 18-24 said they had used credit for housing in the past year, according to the poll of 2,000 households by YouGov.
Regionally, the situation is worst in the Midlands and Wales, where 1 in 10 people say they have used credit to keep a roof over their head in the past year.
Northern England and London are closer to the national average at 6%, whilst Scotland was lower at 3%.
'Ordinary people are being forced to seek more risky and expensive ways to stave off the threat of eviction and repossession,' said Shelter chief executive Adam Sampson.
Mr Sampson said: 'The number of people hit by the credit crunch, interest rate hikes and unaffordable housing costs is rapidly rising.'
It comes as no surprise then, that many debt experts have blamed lenders for allowing customers to borrow too much money:
'It's fine if you pay off the balance every month but I would suggest most people don't - they just pay off the minimum, so the debt starts to spiral.' said Heather Keates, director of Community Money Advice.
Lenders have relaxed their criteria in recent years, as the house price boom has made property unaffordable for many people based on traditional mortgage multiples of 3.25 times salary. Many mortgage providers will now lend 5 or even 7 times salary in a relaxation of lending rules that critics have branded "irresponsible".
But Jenny Challenor, a mortgage strategist at independent financial adviser Torquil Clark, said lenders should not shoulder all the blame:
"While high salary-multiple lending has its part to play, I would raise questions as to whether general irresponsible mortgage lending is at the root of the problem," she said.
"I suspect easy access to borrowing through credit cards and an inability to manage money is closer to the truth."
With more and more people relying on credit cards, repossessions rose 65% during 2006, according to the Council of Mortgage Lenders, and are expected to grow as we all come to terms with household debt which is now running at 150% of average annual income.
But losing your home isn't inevitable, even if you're having trouble making your mortgage repayments.
Here are some ideas that could help you out:
- Speak to your mortgage lender as they will do their best to help
For example, if you have a repayment mortgage, you could switch to an interest-only plan. If you are already repaying only interest, then you could arrange a mortgage holiday. If your own lender can't help, you could remortgage, but remember that you may have to pay penalties and fees for settling your mortgage early and could rack up larger debts in the long term.
- Get advice from a specialist charity or organisation
Try
Citizens Advice; you can find a local office in the phone book or at
www.citizensadvice.org.uk or the
Consumer Credit Counselling Service (CCCS) at
www.cccs.co.uk.
There is no need to pay expensive private agencies; these services are free.
- Check your credit report with CreditExpert
This is the personal history of the credit you have taken out, from your mortgage to catalogue accounts. It will give you a snapshot of how much you owe and how well you are coping.
Lenders look at your credit report when they decide whether to make you an offer and what terms to set, so it's crucial that it's up to date and accurately reflects your position.
A repossession will stay on your credit report for 6 years (the same length of time as an Individual Voluntary Arrangement or bankruptcy) and could make it difficult for you to get credit in future or result in you paying higher interest.
See your credit report for free here.
- Get a quick personal finance check up
Use the Money Hospital
health check to get a diagnosis on your finances and see what money medicine you need.
Start with what you are spending now and see what you can trim but remember essential bills, such as utilities, council tax, insurance and food.
You'll find a budget calculator on the website of the FSA, the UK's financial watchdog, and also a mortgage calculator - go to www.moneymadeclear.fsa.gov.uk .
The Council of Mortgage Lenders at www.cml.org.uk also offers a mortgage calculator that allows you to see the impact of any changes to your mortgage or level of payments.
Even if you can't manage the full amount, you should pay as much as possible. This shows your lender that you are making an effort and may increase your chances of negotiating an affordable deal.
- Investigate financial help; for example, you may have mortgage protection insurance or be able to claim benefits.
If you have a spare room, you could take in a lodger;
up to £4,250 a year is tax-free. If you have a garage or parking space, that could also generate extra cash. Other options include taking a second job or looking for a better-paid job.
- Look at taking out a new loan to pay your debts
Shop around and you could find a deal that works out cheaper than paying off a series of individual bills; your credit report will help you to see where you might make savings. But be careful, as if it is secured against your home, you could be putting it at even greater risk if you miss any repayments.
If you're desperate, it's far better to sell your home yourself - at least you'll still have somewhere to live while you market it. If you give the keys back to your lender, you will be responsible for the mortgage until it's sold and you could have to pay any shortfall if the lender sells it for less than the value of the mortgage.
- Be wary of sell-and-rent-back schemes
Specialist companies offer to buy your home very quickly, usually within weeks, and rent it back to you for a set period of at least six months.
The schemes may be called mortgage rescue, rent-back, or sell-to-let, but they are not regulated by the FSA, so you have no come-back if anything goes wrong. You will normally get less than the market value for your property and could also be evicted if you fall behind with your rent.
So, who is to blame for the situation some of us are facing?
Is it the mortgage lenders for allowing us to borrow too much money? Or is it our personal inability to manage our finances properly?
Are you one of those using your credit card to keep up your mortgage payments? How have you been finding things?
Why not let us know in the comments?