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.”

The return of the 17.5 per cent VAT rate and the end of many fixed mortgages, on top of increasing interest rates is expected to push the number of people unaccustomed to being in debt into the red.

The CSA has noted a sharp increase in the volume of debt coming from sections of the public not previously associated with financial distress during the downturn.

And CSA president Roger Lucas expects it to get worse. Lucas said: “Despite the recession many individuals have managed to cut their cloth according to their means, but they are fast running out of cloth. It is no single issue but rather the cumulative effect of a number of challenges that will prove the tipping point to plunge a new generation into debt.”

Of particular concern is news that many of the fixed rate mortgages that homeowners have come to enjoy are coming to an end, just at the point that interest rates look set to rise.

Lucas added: “There have already been warnings about homeowners being caught out with new mortgages and having to resort to credit cards to make payments. Unfortunately this is storing up trouble for later, and our members are beginning to see the first signs of it already.”

36,000 cases have been seen by the court desks over the past year, and more than 100,000 households have benefited from free advice on managing their debts from charities and councils.

The Government claims that services offering free advice and representation in court have helped stop repossession in four out of five cases making use of their service.

Over the last year, over 330,000 homeowners have received help and advice with their mortgages.

Latest FSA figures show there were 13,987 repossessions between July and September, 5% less than at the beginning of the year.

Repossessions are running at half the rate of the last recession, and the Council of Mortgage Lenders has reduced their repossession forecasts for this year by over a third – from 75,000 to 48,000.

The largest mutual operates a positive order of payments, which means the customer’s most expensive debt is paid off first, unlike other providers who choose to leave items with high interest, such as cash advances, to continue to accrue interest while paying off balances with the lowest interest rates first - such as balance transfers.

It is the only high street provider to do so.

The research found that 63% of credit card customers still do not understand the order in which their repayments are allocated, compared to 69% in 2007. Steps taken to make order of payments more transparent have not worked. The Summary Box was created by the credit card issuers in 2003, providing key product information including order of payments. In October 2008 the Department for Business, Enterprise and Regulatory Reform (BERR) went a step further, requiring all credit card providers to highlight on customers’ statements how payments are allocated. Yet this research shows these steps have made almost no difference to customers’ understanding.

65% of credit card customers think it is unfair for providers to make an additional profit from operating an adverse order of payments. while 67% of credit card holders think that the Government should intervene and make credit card providers pay off customers’ most expensive debt first.

Nationwide recently welcomed the review by BIS (Department for Business, Innovation and Skills) on credit and store card practices. To encourage the Government to intervene consumers need to act now, before the consultation period ends in January, and write or e-mail BIS with their views. Nationwide estimates that UK consumers would save around £500m if all credit card providers adopted a positive order of payments.

AXA said a survey conducted by YouGov on its behalf showed buy-to-let landlords hoping to hike rents to offset higher mortgage costs could be in for a shock as the credit crunch leaves tenants cash-strapped.

It said 7 percent of private tenants had slipped into arrears in the last three months — just over half the number 12 months ago.<!–more–>

More than half of all private tenants polled said they were increasingly concerned about being able to afford their rent.

Research shows that over a third of people privately renting are doing so because they can’t get a mortgage at the moment. On the surface of it, the rental market should be buoyant, but many of those renting may be struggling to make ends meet which is not all good news for buy-to-let owners.

The housing market is in the midst of a sharp correction after a decade-long boom, largely due to a global credit crunch, which has pushed up the cost and shrunk the availability of any type of credit such as personal loans and mortgages.

Benchmark house price indexes from mortgage providers Nationwide and Halifax indicate the average cost of a home has dropped by some 10 percent since last summer. Anecdotal evidence from estate agents suggests house prices may have already fallen by around double, bolstered by recent auction prices which have fallen by around 20 percent.

Unlike owner-occupiers, buy-to-let landlords have the option of raising rents to offset costs. Job security is also less of an issue for buy-to-let landlords since they can access a growing pool of alternative private renters.

But they could still be left financially strapped if more and more tenants fail to pay the rent.

The YouGov poll was carried out online on July 22 to 30. The sample size was 8,372 adults, of which 1,046 rented from a private landlord.

This news comes after Alistair Darling’s assurance earlier this month that the threat of a recession in this country is unlikely, a claim which many in the financial sector disagree with. While Darling maintains that the economy ‘will continue to grow’, economists still insist that we are still on the ‘downward spiral’.

While there is no clear consensus on the projected length of the crisis, financial organisations’ end-of-year balance sheets and premiums will certainly see some disruption as the economy rebalances.

A poll from the Yorkshire Building Society shows that the average amount spent each month has now hit £1,445.

However, the average put aside in “accessible” savings, such as instant-access cash ISAs, stands at just £2,474.

Worse still, over one third of people would clear their savings in 11 days or less if their income was stopped.

Around 20 per cent of poll respondents indicated that they had “no idea” how they would make ends meet if they no longer worked - and nine in ten said that they had not taken out any income protection insurance to help them through tough financial times.

Moreover, many were found to have “unrealistic” plans for what to do if they did lose their jobs: for example, 19 per cent said that they would take out state benefits to tide them over.

This is despite the group having around £334 of weekly expenditure on average - and total benefits coming to a mere £75.40 a week.

They claim that at least 130,000 people will become bankrupt or take out an individual voluntary arrangement during 2008.

An IVA is a legally bound agreement that ensures creditors will not take insolvency action against whilst a debtor pays what he can afford for an interim period. Approximately two thirds of people who enter into an IVA are homeowners.

KPMG also predict that there will be a record-breaking 40,000 people going bankrupt or entering into an IVA in the first quarter of 2009 – 10,000 people more than in the same period last year.

KPMG state that rising mortgage costs and general day-to-day living will tip most people over the edge.

With the average mortgage standing at £158,000 and energy and food bills rising at an inflation busting pace, many families will need to pay out at least £2000 more per year to avoid going under financially.

Figures for insolvency in January to March this year shows that there was actually a small fall in insolvencies, this however seems to be only a temporary respite.

Economic growth fell to 0.4% in the first quarter of this year – in the same period last year it was 0.7%

This suggests that the Chancellor - Alistair Darling will not meet his forecast of 2% growth for 2008, outlined in April’s budget. Economists all seem to suggest that this is only the beginning of a deep and prolonged economic slowdown.

Some 84 percent of successful credit card applicants — 4.8 million people — were not asked to provide any proof of income, such as payslips, to support the figures stated in their applications in the past 12 months, according to a YouGov poll of 4,048 people.

The survey, commissioned by price comparison website uSwitch.com, also showed that 14 percent were not asked about their salary or outgoings during the application process — yet they obtained average credit of 3,545 pounds, equal to a total of 2.9 billion pounds.

Just 8 percent of those surveyed were asked for proof of income or outgoings when taking out credit.

Some 5 percent of people confessed to lying about their salary when applying for a credit card, adding up to 70 percent onto their actual income and securing over 693 million pounds worth of credit as a result.

“We cannot ignore the fact that the credit crunch has forced lenders to tighten their belts and reject applications that may lead to further write-offs,” said Simeon Linstead, head of personal finance at uSwitch.com.

“(But) the fact remains that just because a consumer appears to have a ’suitable’ credit score, it doesn’t mean they are always honest about their income and actually have the cash available each month to pay the bill.

“The credit squeeze will back some consumers into a corner and — in sheer desperation — people will resort to lying about their salaries as this is such an easy loophole to exploit.”

He said it was too early to tell whether the latest version of the Banking Code, which came into effect in March 2008 and made credit reference checks mandatory, was having the desired effect.

The new code makes it necessary for companies to also take at least one of three other measures: obtain details of income and financial commitments; evidence of how finances have been handled in the past; use credit assessment techniques, such as credit scoring or internal credit scoring processes.

The impact of the credit crunch means that one in ten people can no longer afford to save and have in fact started dipping into savings to meet their monthly outgoings, with the 18 – 24s most likely to have to resort to raiding their accounts to make ends meet (14pc).

The findings also reveal that one in twenty people are spending over 50% of their salary on unsecured debt repayments. While this remains a relatively low figure it has more than doubled compared to a previous survey conducted in September 2007.

Owen Roberts, head of Callcredit Check, commented, “These findings are a stark illustration of how the credit crunch is already affecting consumers; it’s clear that the rising cost of everyday living is having an immediate impact on our ability to save. Many UK workers are at what could be described as a financial tipping point where just one unexpected unfortunate incident could have dire financial consequences.”