Save, make, understand money


Quarter of mortgage holders use credit to pay for borrowing

Quarter of mortgage holders use credit to pay for borrowing
Matt Browning
Written By:
Matt Browning

A quarter of mortgage holders took out more credit to keep up with their current borrowing commitments, a debt charity reveals.

In the last three months, 23% of UK mortgage holders have taken that decision, while one in six (16%) have made the move to keep up with their bill payments.

This rate is higher than for those who rent or have other living arrangements, StepChange’s study finds.

The number of households struggling to keep up with the cost of living was also highlighted in the latest UK Finance data on arrears and repossessions.

In the first quarter of 2024, 96,580 homeowners were in arrears by 2.5% or more of their outstanding balance. This is a rise of 3% on the previous three-month period.

Meanwhile, from September to December last year, 870 homeowners with a mortgage had their home repossessed, a rise of over a third (36%) on the previous quarter.

Following today’s (9 May) announcement from the Bank of England that the base rate will remain at 5.25%, the debt charity has raised concerns about how some mortgage holders will cope.

Step Change has warned mortgage holders that those coming to the end of their fixed term deal might pay almost double on their new offer.

‘Homeowners facing payment shock’

Richard Lane, chief client officer at StepChange, said: “Most of the people currently seeking our help are tenants, but homeowners facing payment shock at the end of expiring deals are often the clients facing the most sudden, acute cliff edges of unaffordable cost hikes.

“There are still hundreds of thousands of people set to face this kind of payment shock this year – the problem hasn’t yet gone away.”

Lane also urged the Government to extend its help through the mortgage charter scheme, which includes measures such as a higher threshold for borrowers to be removed from their homes.

This charter is due for a review at the end of June, and Lane alerted homeowners who may be struggling to seek help.

He added: “In the meantime, any homeowner struggling to keep on top of bills should know that help is available.

“Not only are mortgage lenders duty-bound to try to help, but services like StepChange can help you look at your finances in the round, not just your mortgage, and advise on solutions to help you achieve an affordable and sustainable budget.”