One in 10 people in the UK (13%) rely on overdrafts to cover the cost of rent and mortgage payments – the equivalent of 1.2 million people, research shows.
The survey from comparethemarket.com found 30% of UK adults have to dip into their overdraft because they have run out of money before the end of the month.
Two-fifths (40%) use their overdraft for emergency funding and 23% use them to cover the cost of everyday bills.
30% of UK adults dip
into their overdraft
because they have run of money by the end of the month
40% of UK adults use their
overdraft for emergency funding
23% of UK adults use
their overdraft to cover the cost of everyday bills
Figures show rents are rising at their fastest pace for three years, with the average rental price nationally standing at £886.
Meanwhile, the average mortgage payment is £680 per month.
The comparison site warned overdrafts can be a very expensive way to manage debt because of fixed daily or monthly charges, as well as fees for having an overdraft facility in place.
Who buys what?
UK consumer buying habits
From 6 April 2020, these charges will be scrapped and banks must charge a simple annual interest rate for overdrafts, without additional fees and charges.
John Crossley, head of money at comparethemarket.com, said many people will have rainy day moments during their life when they 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,” he warned.