Thirteen per cent of the UK, or the equivalent of 1.2 million people, are relying on their overdrafts to cover the cost of their mortgage or rental payments, according to new research by comparethemarket.com.

The research, based on the results of a January survey that questioned 2,123 adults in the UK, also revealed that 30% are having to dip into their overdraft because they have run out of money before the end of the month.

Of the 1.2 million people, which was calculated using population data from the Office for National Statistics, comparethemarket.com suggested 20% are using their overdraft to cover the full payment amount, while another 24% are using it to cover half of the cost, on average.

The research also found that 40% are using their overdrafts for emergency funding while another 23% are using them to cover the cost of everyday bills.

“During the course of life, we will all have rainy day moments when we’ll need to use emergency funds,” comparethemarket.com head of money, John Crossley, commented.

“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.

“With the rise in overdraft fees, there are other solutions available to pay off debt in a responsible way. Borrowers should ensure they only borrow what they can repay and use a soft eligibility checker to prevent damaging their credit score. Anybody struggling to make repayments should contact their provider in the first instance.”

While comparethemarket.com suggested overdrafts can be an expensive way to manage debt – due to fixed daily or monthly charges, as well as fees for having an overdraft facility in place – from 6 April 2020, however, new FCA rules mean these charges will be scrapped and that banks must charge a simple annual interest rate for overdrafts, without additional fees and charges.

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