A third of people with adverse credit would say the level of their unsecured debt has increased in the last 12 months, new research from Pepper Money has indicated.

The specialist mortgage lender found that 33% of people with adverse credit say the level of their unsecured debt has increased in the last year.

According to the latest Pepper Money Specialist Lending Study, based on research among more than 6,000 adults, 40% also said they have increased the debt they have on buy now pay later schemes.

Pepper Money found that 19% of respondents with adverse credit have outstanding debts, aside from the mortgage and student loans, of more than £10,000. The research also showed 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.

Head of sales, second charge mortgages at Pepper Money, Tom Whitney, said that the cost of living crisis is “driving an increase in levels of unsecured debt”, at the same time as rising interest rates are making it more expensive to service this debt.

The monthly commitment of servicing short-term debts such as credit cards, store cards and overdrafts, can stifle the ability of many families to meet their monthly outgoing and many will be looking to streamline their finances,” Whitney commented.

“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 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.”

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