Santander research claims that over 1 million UK households are borrowing £2 billion a year by way of payday loans which they are using to pay essential household bills such as gas, electricity and water. “Whilst there may be a general necessity and clearly there is a need, the existence of payday loans can be viewed as a poor indicator of both overall affordability and general household management when it comes to mortgage lending” according to Rob Killeen, Business Manager at Capital Fortune.
There is evidence that the very existence of a payday loan application, whether taken or not can now result in a mortgage application being declined.
Santander research claims that over 1 million UK households are borrowing £2 billion a year by way of payday loans which they are using to pay essential household bills such as gas, electricity and water. “Whilst there may be a general necessity and clearly there is a need, the existence of payday loans can be viewed as a poor indicator of both overall affordability and general household management when it comes to mortgage lending” according to Rob Killeen, Business Manager at Capital Fortune.
There is evidence that the very existence of a payday loan application, whether taken or not can now result in a mortgage application being declined.
The Santander research further found that 28% of people are using regular unsecured credit including overdrafts, payday schemes, credit cards, and other loans. It would seem that £3.6 billion a month is in fact being borrowed to meet the cost of expenses such as electricity, gas, water, council tax, and other bills, Santander said.
17 per cent of UK adults regularly use their Bank overdraft facility to pay bills borrowing an average of £264 each. This is the main source of unsecured borrowing.
2 per cent of people collectively borrow £2 billion every year, or £153 each per month, from payday lenders to cover these basic monthly bills.
"In an ideal world, household bills should be one of the first costs to be covered when payday arrives, but as the research highlights, this isn't always possible. Said Reza Attar-Zadeh, banking director of Santander.
