Rising living costs are forcing people to take out loans or use their credit cards to pay for mortgages and rent, a study from Moneysupermarket has found.

Their research found that seven per cent of people had taken out personal loans because of the rise in mortgage or rental costs, and nine per cent of people had spent more on their credit cards because of higher household costs in the past year.

£30 billion pounds worth of mortgage deals are also due to come to an end in July, so many more people may be about to face much higher monthly repayments on their homes.

Moneysupermarket’s Tim Moss says: “It’s a very serious situation when you have people turning to a short-term solution to fund a long-term product.

“Having a roof over your head has to be your top priority but to be funding that with a loan you might default on or with a credit card that will eventually charge you interest of over 15 per cent isn’t the solution in the long term. Approximately 4.1 million households have fallen into this trap in the past year – and it needs to be remembered that taking out a loan specifically for a mortgage goes against lenders’ rules.

“There’s no point having Sky+ if you don’t have a roof over your head. You should also shop around so you aren’t paying over the odds for the essentials of life such as heating, electricity, food and insurance.

Chiltern’s Nathan Gladwell says: “Prioritising outgoings is the first thing that needs to be done to ensure that you keep your roof over your head and essential services like water and heating switched on, but doing so by using credit isn’t the answer.

“Funding a mortgage with a loan or credit card could have serious risks, as it means that each month you’re just going further in debt.

“You could always visit the Chiltern website www.chiltern.uk.com to find ways of reducing outgoings or maximising your income, or download a budgeting sheet to help you organise your outgoings better.

“However it may work better to re-schedule unsecured debts to more affordable levels, so you have money each month to cover living costs and basic Sky and mobile packages whilst still repaying debts.”

An informal arrangement prioritises outgoings and ensures that debts are still repaid, but at a level that is more realistic for the debtor.

The Chiltern website now provides ways of reducing outgoings by finding cheaper insurances, mobile phone tariffs and through switching energy suppliers, and also shows how you can make money from recycling old mobile phones.

Go to www.chiltern.uk.com and click on the money saving advice tab – resource directory – or click HERE.