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One in 10 use overdraft to pay their mortgage or rent

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05/03/2020
Many are struggling to make ends meet, but overdrafts are a particularly expensive way to manage your money
One in 10 use overdraft to pay their mortgage or rent

A shocking 13% of people in the UK rely on their overdraft to cover the cost of rent or mortgage payments, according to Compare the Market.

This is the equivalent of 1.2 million regularly going into the red in order to pay for the roof over their head.

Of these, one fifth (20%) use their overdraft to cover the full payment amount of the housing costs, while a quarter (24%) use it to cover, on average, half of the cost.

The price comparison site also found that nearly a third of current account holders (30%) go into their overdraft due to running out of money at the end of the month.

Cost of housing

Rents are rising at their fastest pace for three years, with the average rental price nationally standing at £886, said Compare the Market. The average mortgage payment is £680 per month.

When it comes to paying monthly bills, overdrafts are an expensive way to manage debt due to fixed daily or monthly charges, as well as fees for having an overdraft facility in place.

John Crossley, head of money at comparethemarket.com said: “During the course of life we will all have rainy day moments when we’ll need to use emergency funds. On these occasions, people need pots of money to dip into – a savings nest egg. Relying on overdrafts to fund regular bills, including mortgage or rental payments, can be a costly way of managing household finances.

“With the rise in overdraft fees, there are other solutions available to pay off debt in a responsible way. Borrowers should ensure they only borrow what they can repay and use a soft eligibility checker to prevent damaging their credit score. Anybody struggling to make repayments should contact their provider in the first instance.”

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