Over two in five (41%) people have increased their unsecured borrowing in the last 12 months, Pepper Money has revealed.

The firm’s latest specialist lending study found that almost 30% of those surveyed have outstanding debts of more than £5,000, with 10% saying their unsecured borrowing in more than £15,000.

This data coincided with the Bank of England’s findings that revealed that credit card lending had increased in Q2.

Director at All Money Matters, Wayne Smethurst, said: "Affordability has long been one of the major challenges for customers who want to buy their first home or trade up to the next rung on the ladder.

"In recent months, we’ve seen a definite upward trend as so many people have increased their unsecured borrowing during the cost-of-living crisis, and these outstanding debts can significantly reduce the size of mortgages available to them or see them being rejected altogether."

Pepper Money’s research also found that 44% of those who have buy now pay later borrowing said their amount of debt through these services has increased in the last 12 months.

These rising levels of debt are dampening the hopes of prospective buyers getting a mortgage, with 42% being concerned that their level of outstanding debt will negatively impact their mortgage aspirations.

Director of business development at Pepper Money, Ryan Brailsford, said: "There are many factors that could see a mortgage application declined by a high street lender only to be approved by a specialist lender, who have expertise in underwriting more complex cases.

"Missed payments can see applications turned down, and this year’s specialist lending study found that 8.38 million people have experienced adverse credit in the last three years. Outstanding unsecured debt is another reason why a customer’s circumstances could be considered ‘just-off-high-street’ as many lenders will impose a limit on the debt-to-income ratio."

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