The debt charity said 18% of its clients owed £3,530 on average to a friend or family member in 2010. This figure represented more than one sixth of clients’ total average unsecured debt of £22,476, according to the charity.

The average monthly repayment agreed by clients who borrowed from family or friends was £124 - making up one of the five or six debt repayments that the typical person contacting the charity was struggling to meet each month.

The charity started collecting this information in 2008 following anecdotal reports from its debt counsellors of an increase in this type of lending, possibly as a result of restricted credit conditions during the recession. The main problem with informal borrowing in this way is that it can place an enormous strain on friendships and family relationships and should ONLY be thought through very carefully.

The Debt and Household Incomes report found that 3.2m households are already in financial difficulty, either three months behind with a debt repayment or are subject to some form of debt action such as debt management, Individual Voluntary Arrangement, Trust Deed, Low Income Low Asset, Debt Relief Order and bankruptcy.

A further three million are at risk of financial difficulty because they are finding it hard to make ends meet and are vulnerable to increases in household bills such as food and energy.

Unsuprisingly those on low incomes and with either little or no savings were identified as the most vulnerable and researchers found common issues among this group.

Among these were a risky dependency on credit for low-income households. CCCS clients earning up to £13,500 a year typically had unsecured debts totalling 20% more than their annual income.

This is significantly higher in households earning between £25,000 and £50,000, whose average debt was 95% of annual income.

Lower to medium and medium to higher income households also struggled to manage debt, with more than a third of CCCS clients earning between £13,500 and £25,000 had no money left at the end of the month to repay their unsecured debts.

Lord Stevenson of Balmacara, chairman of CCCS, said: “Unfortunately, these figures confirm our fears - that troubled times lie ahead for many people in the UK. What this report shows is that the pain is going to spread wider and affect many more people than many commentators have previously assumed.”

The report also found that more than 759,000 mortgages were in some form of forbearance, meaning the total number of mortgages in arrears, in possession or subject to forbearance is currently 1.2m, nearly 11% of all total outstanding mortgages.

This left 50% of the lowest-income households already in deficit, a position that would be greatly exacerbated by a rise in the base rate of interest.

Gavin Kelly, Resolution Foundation chief executive, said: “Many people who scraped through the recession are going to find the next few years even harder. It is very likely that there will be a significant rise in the number of households struggling to maintain their debt repayments, which is a major concern both for them and the wider economy.”

Shelter’s new research shows the places in England with the highest proportion of homeowners who have been issued with a possession order, and therefore are at serious risk of being repossessed.

With experts predicting repossessions will rise to 45,000 next year, the charity is highlighting the research to encourage homeowners who will be hit when interest rates rise to start preparing now for higher mortgage costs so they don’t find themselves at risk further down the line.

Shelter conducted the research by analysing the latest Ministry of Justice data on the rates of claims leading to possession orders per 1,000 households across every local authority. In total there were 65 local authorities identified as repossession hotspots because they are in the top fifth nationally of all the local authorities.

The analysis shows that Corby in the East Midlands is currently the country’s top hotspot, having the highest rate of at risk homeowners, closely followed by Barking and Dagenham and Newham in London, Knowsley in Merseyside and Thurrock in East of England.

The results also reveal worrying groups of local authorities in parts of the county, including a ribbon of repossession hotspots across the North from Merseyside to the Humber, large parts of Tyneside, a cluster of Kent and Essex coastal towns along with areas of East Anglia.

The research also found a strong link between unemployment and rates of possession orders with unemployment having risen at more than double within the hotspots in comparison to the least at risk areas.

Campbell Robb, chief executive of Shelter said:

“This research paints a frightening picture of repossession hotspots across the country where homeowners are literally on the brink of losing the roof over their head.

“We know only too well that the combined pressures of high inflation, increased living costs and stagnant wages are really taking a toll on people. All it takes is one thing like job loss to tip people over the edge and into the spiral of debt, repossession and ultimately homelessness.

“And with interest rates due to increase in the near future this research is a clear warning sign of difficult times ahead for many thousands of homeowners across the country.

“It is absolutely vital that struggling homeowners, in particular those at risk when interest rates rise, get help before things spiral out of control and they risk losing their home.”

More than half the new cases (51 per cent) related to the sale of Payment Protection Insurance (PPI), which made up the highest number of complaints ever received in a year about a single financial product – 104,597 in total.

Despite the rise the Ombudsman settled fewer disputes during the year, resolving 164,899 cases during 2010/11 down from 166,321 the previous year, which it attributed to slower progress on large numbers of PPI complaints.

A statement in the FOS annual review said: “PPI complaint resolutions were hampered by delays, uncertainty and less co-operation from some financial businesses, as a result of the legal challenge on PPI-related matters brought during the year by the British Bankers Association on behalf of a number of high-street banks.”

The FOS also revealed that six per cent of all complaints received centered around consumer credit, where 50 per cent of disputes were upheld in favour of consumers. Meanwhile total complaints about banking fell by nine per cent compared to the previous year.

During the period the Ombudsman handled around 4,000 front-line enquiries and complaints from consumers every working day, with one in five enquiries becoming a formal dispute requiring adjudicator and ombudsman involvement.

Natalie Ceeney, chief executive and chief ombudsman at the FOS said despite the past year being one of the Ombudsmans’ busiest there were improvements in the way businesses handled complaints.

There was a significant increase in the number of debt relief orders, which rose by just over a fifth to 6,788 compared to the first quarter of 2010.

Levels of personal insolvencies have been reducing throughout 2010 but many insolvency practitioners believe that we may be on the verge of seeing levels rise again to around 130,000 by the end of 2011.

As the Government’s austerity measures (introduced in April 2011) begin to bite these can take months for the effect to be felt in people’s wallets.

There were 12,539 bankruptcies in the first quarter of 2011, a decrease of 30 per cent on the same quarter the previous year.

Pat Boyden, partner in PwC’s insolvency team, said: “Although debt levels remain fairly high, this downward trend is being driven by the lack of available credit in the market and a fall in uncontrolled debt”.

He added: “Evidence suggests that people are struggling more with their day to day financial pressures such as utility bills rather than their levels of existing debt.”

Individual Voluntary Arrangements (IVAs) were down 8 per cent compared to last year with a total of 10,835 being arranged.

He urged anyone who thinks they may be at risk of losing their home to take action immediately, saying that there is help available, and that repossession should only ever be the very last resort.

It comes as new figures from the Council of Mortgage Lenders released today show that repossessions in the first quarter of 2011 were down 10 per cent on the same period in 2010.

Mr Shapps said that the Government’s ongoing efforts to tackle the record deficit will continue in order to prevent rapid increases in interest rates.

Mr Shapps said:

“No one in financial difficulty should be embarrassed to seek help if they need it. The worst thing for any struggling homeowner to do is to bury their heads in the sand hoping the problem will eventually go away.”

“Today’s figures underline how the recession has brought difficult times for lots of people. The most effective thing anyone with money worries can do is to seek early advice and speak to their lender to avoid losing their home.”

Latest figures also published today show that one of the schemes aimed at helping the most vulnerable homeowners, the Mortgage Rescue Scheme, has helped 5,039 households receive help and advice from their local authority in the last quarter, with 2,621 homeowners having completed the full process since the scheme’s launch in January 2009.

The Consumer Credit Counselling Service (CCCS) revealed that in the first half of 2010, 14,446 people claiming JSA who contacted the charity owed an average of £15,412 to five different creditors.

This figure amounted to one out of every eight people who contacted CCCS during this period, with the charity warning that huge numbers of people in this situation would never be able to pay back their unsecured debts, even if they put their entire JSA towards repayments.

Malcolm Hurlston, chairman of CCCS, said: “Thousands of people claiming JSA are ensnared by unsecured debt and their needs demand specific study.

“Government must be mindful of how welfare cuts will affect those living off benefits and move to ensure they are not damning huge numbers of people to a lifetime of debt.”

According to the CCCS figures the proportion of their clients who are in debt while claiming JSA is almost three times higher than in the general population.

The charity said that one of the key reasons for the debt problems was unemployment, with 22.4 per cent of people who contacted CCCS in the first half of 2010 citing this as a reason for their debt problems, a figure which is disproportionately higher than the current eight per cent level of UK unemployment.

Hurlston added: “There is a causal link between unemployment and debt. Unemployment can devastate the finances of any family and our experience shows that once somebody with few financial options is forced to take out a loan to cover living costs they are often then trapped in debt for years to come.”

Total UK personal debt stood at £1,464bn at the end of February 2010, a 0.9 per cent rise from the last year, Credit Action said.

The average household debt in the UK, including mortgages, is now £58,083. The increasing debt pile now means that an average family has to cough up 15 per cent of total income purely to meet interest payments on the debt, according to research by PricewaterhouseCoopers.

Britain’s total interest repayments on personal debt were £68.4bn in the last 12months. The average interest paid by each household on their total debt is approximately £2,716 each year.

Richard Talbot from Credit Action said that the interest payments meant £187m is paid in personal interest payments every day.

But despite a ballooning debt burden, consumer borrowing via credit cards, motor and retail finance deals, overdrafts and unsecured personal loans has risen to £4,658 per average UK adult at the end of February 2010.

And government debt is still climbing upwards by £397,500,000 a day, which is threatening to derail the UK’s economic recovery.

However, in fresh signs that the banks are more willing to lend again to businesses, total lending in February rose by £2.1bn, while banks increased secured lending by £1.6bn during the period.

The Real Cost of Christmas report, written by think tank the Financial Inclusion Centre, found that an estimated £29 million in illegal doorstep loans were taken out over the holiday season, making it the worst Christmas in a generation for this type of borrowing.

Circle Anglia commissioned the research to highlight the issue after noticing an increase in the number of its residents being targeted by loan sharks, and has launched a campaign to raise awareness among residents, who find themselves in financial difficulty.

Evidence shows that on average people borrowed nearly £300 from loan sharks to cover the cost of Christmas, but with exorbitant interest rates averaging 825% (some rates can reach as high as 1,500%), they will pay back over £800. The average loan repayment period is a year, meaning that a large number of Britain’s poorest households will still be paying off their debt in Christmas 2010.

The report also found that illegal loan shark activity is on the up in the UK. Over the last three years the estimated use of loan sharks increased from 165,000 to over 200,000 households per annum – a 22% rise.

As the recession continues to bite, loan sharks have moved in with loans from illegal doorstep lenders at Christmas time accounting for up to half of all loans borrowed from loan sharks in 2009.

Consumer minister Kevin Brennan said: “The Government has created specialist Trading Standards illegal money lending teams around the country so that they can come down hard on loan sharks. The teams have helped more than 10,000 victims and written off more than £30 million of illegal debt. They have already secured around 50 years in prison sentences, helping to rid communities of these criminals. I’d encourage anyone who feels trapped by a loan shark to get help and advice as soon as possible.”