Brits 'shouldn't rely too much on credit'

A spokesperson from the money education charity Credit Action has warned that people in Britain should ensure that they do not rely too heavily on credit as the cost of living goes up.

Recent figures from Capital Economics suggest that, while mortgages payments could reduces as a result of the credit crunch, this will be counteracted by price increases elsewhere, reports the BBC.

For example, gas and electricity bills will rise by around ten per cent by early 2009 and food inflation is set to remain at its current rate of six per cent for the next few months.

Meanwhile, earnings will not reflect the increased cost of living, with average pay rises only likely to amount to around four per cent for the year.

Credit Action director Chris Tapp said people may be increasingly be incline to revert to borrowing on credit cards to pay for bills at the end of the month.

"It may be a reasonable option in the short term, but people have to be very careful they don't find themselves overly reliant on credit, which is unsustainable in the long run and can lead to people getting in real difficulty," he said.

In related news, figures from Moneyfacts show that the number of mortgage products available has fallen as a result of the current economic conditions; at the beginning of 2008 there were 7,931 mortgage products available, but by the end of April, this figure had reduced by nearly 50 per cent.