In what could be a warning of things to come for Canadians who may struggle their mortgage payments if interest rates rise, it has been reported that more than 2 million people in Britain have used credit cards to pay their mortgage or rent, an increase of almost 50 per cent in a year, according to the housing and homelessness charity Shelter.
Research for Shelter conducted in August found that six per cent of the 2,200 questioned had used credit cards to meet their housing costs in the previous 12 months. This compares to four per cent 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 recent warnings from Bank of Canada governor Mark Carney about household debt, which saw Canadians’ debt-to-income ratio exceed their U.S. counterparts for the first time in 12 years, and indications from Federal Finance Minister Jim Flaherty that the government may consider tightening mortgage rules, this news serves as a wake-up call for what may happen down the road if unemployment and/or interest rates increase.
Campbell Robb, chief executive of Shelter, told The Guardian newspaper “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.”
Recent discussion on MortgageBrokerNews.ca highlighted concerns from Canadian mortgage brokers that credit card and other unsecured debt are as much to blame for the increase in household debt levels.
“It’s time to review payday loans, credit cards and bank loans, not mortgage rates and the mortgage qualification process. Telling someone you'll make it harder to put a roof over their head and force them into eternal renting, but letting them fall victim to pre-approved credit cards and loans with high rates is not acceptable,” was one comment that typified the response from the broker community.