Mortgage hopefuls are being warned about their credit card debt by experts, with new data revealing the true scale of borrowing in the UK.

The warning comes as UK Finance, the banking trade body, revealed that outstanding credit card balances have shot up by 9.9% in the year to March 2024. That means almost half (49.8%) of us are now paying interest on our credit card debt.

With the cost of living soaring and interest rates at a 16-year high, it’s no wonder people are relying on credit cards to make ends meet. But experts warn this could be seriously damaging when it comes to getting a mortgage.

Justin Moy, managing director at EHF Mortgages, said: “Increasing credit card balances are a huge problem. It’s been made worse by higher interest rates and the cost-of-living crisis. People are using credit cards to cover everyday bills and many are facing sky-high interest rates.”

Mortgage lenders are now less likely to allow borrowers to consolidate unsecured debt like credit cards into mortgages, which means borrowers could be trapped in a spiral of high-interest debt.

How Credit Card Debt Impacts Your Mortgage Application

Dariusz Karpowicz, director at Albion Financial Advice, explained that high outstanding balances on credit cards can have a big impact on your credit score. Lenders use your credit score to decide how risky it is to lend to you. A poor credit score means higher interest rates or even outright mortgage refusal.

“We’re seeing more and more clients struggling to pay down their credit card debt, which is making it harder for them to get a mortgage,” he said.

Top Tips to Reduce Credit Card Debt

So, what can you do if you’re worried about credit card debt affecting your mortgage chances? Experts advise taking action now to reduce your debt and improve your credit score.

Here are Kara Gammell’s, personal finance expert at MoneySuperMarket, top tips:

• Pay down your debt: Focus on paying more than the minimum payment each month to clear the debt faster.
• Check your credit score: Knowing your score will help you understand your current position. You can use free services like MoneySuperMarket’s Credit Monitor to check without impacting your score.
• Get on the electoral register: Registering to vote can improve your credit rating as it helps lenders confirm your identity.
• Set up direct debits: Never miss a payment by setting up automatic payments for at least the minimum amount.
• Keep spending to a minimum: Cut back on unnecessary expenses to free up more cash to pay off your debt.
• Be smart with credit: Aim to keep your credit card spending well below your credit limit. Don’t be tempted to max out your cards.
• Shop around for the best deals: Switching to a 0% interest deal could help you pay off debt faster.