Renters trapped by above inflation rent increases

Posted by Sam Twyford in Mortgages on 21 March 2013 - Sam is a Product Manager at checkmyfile

The housing charity Shelter has found that 1.4m people in the UK risk losing their homes after falling behind on mortgage and rental payments with nearly one million turning to payday loans to cover the shortfall.

New research shows that 4% of home-owners risk losing their homes due to mortgage arrears and 20% confirm that they constantly struggle each month to make their payments. This is a 44% increase on Shelter's figures obtained in December 2011.

2.8m people use an unauthorised overdraft to cover their bills with 10% doing so on a monthly basis. Shelter also reports that 1 in 12 renting parents have been forced to borrow cash from their children's savings accounts and one in seven have used their credit card to pay their rent.

The number of payday loans used to help cover the cost of rent or mortgage payments hasn't changed since last year. Although this type of loan is readily available to people with poor credit and would seem the perfect solution to making ends meet, the charges accrued, if not paid back quickly, can quickly spiral out of control putting more strain on family income.

Prospective first time buyers have also been hit because of soaring rents - resulting in many being trapped in the rental sector because they are unable to save the 10-25% deposit that most lenders now require.

To help remedy the position of increasing rents, Cambell Robb of Shelter says that rental agreements should not allow above-inflation rent increases.

He goes on to say that families are being forced to make impossible choices of where to spend available monies, and that “further above-inflation rent rises will push many ordinary families to the edge".

Sam is a Credit Analyst at Checkmyfile, has a degree in Business Studies and is an Associate of the Institute of Credit Management. He can be contacted at sam.twyford@checkmyfile.com

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