It finds that 33% of people with adverse credit say their unsecured debt has increased in the last 12 months, with 40% putting this down to the use of buy-now-pay-later schemes, says the broker-only firm’s Specialist Lending Study.  

Almost one in five, or 19%, of people with poor credit histories have outstanding debts, aside from mortgages or student loans, of more than £10,000.  

The report points out that 31% of people with adverse credit are concerned that their level of outstanding debt will make it harder for them to get a mortgage.  

The survey comes as the Bank of England’s Monetary Policy Committee hiked interest rates by 50 basis points to 3.5% to combat rising prices last week, the highest rate for 14 years. It is the ninth consecutive hike since last November when rates stood at 0.10%.     

Meanwhile, UK inflation dipped to 10.7% in November as an easing in the rise in petrol prices helped to lower the rate from a 41-year high of 11.1 per cent last month, according to the Office for National Statistics earlier this month.   

Pepper Money head of sales, second charge mortgages Tom Whitney says: “In the right circumstances, consolidating expensive short-term credit onto a longer-term loan at a lower rate, could help to put families in greater control and to normalise their finances, as they pay down that credit over the longer term.   

“Managing short-term debt may be increasingly challenging for customers feeling the pinch of inflation of food bills and increasing energy prices.   

“It is important for our broker partners to undertake a comprehensive review of their customers’ circumstances.   

“It may be that waiting for a remortgage may not be right for everyone, but a second charge mortgage used to consolidate unsecured debts could help customers to reduce monthly outgoings and give them the breathing space they need to manage their monthly finances and navigate this difficult period.”  

Pepper Money’s poll was conducted by YouGov in an online survey, which included a nationally representative sample of 6,291 adults in September.