Recent research commissioned by credit reference agency Callcredit and carried out by YouGov has revealed that 26% of mortgage holders would be unable to afford their repayments if their monthly income was to drop by up to £300.

The findings showed that one in eight 35-44-year-olds has deliberately ‘over-inflated’ the amount they earn so lenders would allow them to borrow more.

Graham Lund, Managing Director of Callcredit, said: “These statistics are extremely alarming. A significant proportion of people aged 35-44,  many of who may have families to support, are living on a financial precipice, where just one negative event, such as a reduction in paid overtime or an unexpected expense, could have disastrous financial consequences.

“If the borrower is inflating their income significantly and then maxes out their high credit limit, they are running a serious risk of getting into financial difficulties and being unable to repay the debt.”

An IVA expert for the IVA Forum commented: “Deliberately ‘over-inflating’ the amount earned in order to borrow more can lead to serious financial problems.

“If, like the research suggests, their monthly income was to drop by up to £300, we could see a large number of borrowers who do over-inflate their income not just struggling with their mortgage, but struggling with their day-to-day costs too.”