Payday loans used to fill rent and mortgage gaps

Almost one million people have taken out a payday loan to help keep up with their rent or mortgage payments in the last 12 months, according to research by Shelter.

A YouGov survey for the housing and homelessness charity also reveals that 15% of respondents – equating to almost seven million people – are relying on some form of credit to meet their housing costs, such as payday loans, unauthorised overdrafts, other loans and credit cards.

Shelter is warning that the new year could bring a risk of homelessness for those already struggling to pay their rent or mortgage.

Campbell Robb, chief executive of Shelter, says: “These shocking findings show the extent to which millions of households across the country are desperately struggling to keep their home.

“Turning to short-term payday loans to help pay for the cost of housing is totally unsustainable.It can quickly lead to debts snowballing out of control and from there to eviction or repossession and ultimately homelessness.”

Martin Lewis, founder of MoneySavingExpert.com, says evidence of people using payday loans to meet housing costs is “incredibly worrying”.

He says: “Many battling with core rent or mortgage commitments will struggle to repay such loans on time. While it’s obviously tempting to grasp these loans as a lifeline, in the long run it may hurt more than help.”

However, a spokeswoman for payday loans firm Wonga.com says its internal research shows borrowers are not using its loans for mortgage repayments.

She says: “Our average loan is £250 and customers only use our service on average 3.8 times a year, which suggests they are not using it for things like mortgage payments but rather as a short-term loan to bridge a gap.”