Card debts creating mortgage timebomb30 December 2004
By switching costs through re-mortgaging their homes, the cost of loans could spiral to even higher levels than repaying the debt off more quickly.
Richardson said the typical level of debt transferred - £10,000-£15,000 - was just the tip of the iceberg.
'At the extreme, we have seen individuals trying to consolidate £90,000 of credit card debt,' he said. 'We are into an area we haven't been before. I don't think it signals a crash, but it needs watching. Over time, you can't continue to consolidate debt.'
The housing boom has seen families increasingly viewing their home as a piggy bank to be raided to clear any debts. But with evidence of a housing market slowdown, millions of Britons who have increased the cost and duration of their mortgages could now face poverty in retirement.
For example, paying back a credit card debt of £10,000 over two years - assuming an APR of 15% - would cost £11,637. Switching it to a 20 year repayment mortgage with a lower APR of 6.5% would cost £17,653.40.
The Abbey has calculated that half of Britain's 10m mortgage holders will still be paying off their loans when they are pensioners.
The British Bankers' Association yesterday revealed its total credit card debt rose by £220m in the month to £32.86bn.
The transfer of card debts on to mortgages has pushed personal debt to £1trillion.
Source: This is London
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