Even a small rise in interest rates has the potential to cause ‘debt peril’ due to the amount already owed, according to the Resolution Foundation.

The think tank predicted that 1.1 million households could be in an unsustainable amount of debt by 2018, compared to 600,000 now.

It also suggested that 1.2 million more households could be spending over a third of their income on mortgage repayments by 2018.

The Money Advice Service say that the amount of adults in debt is much higher than thought because a third of debtors manage to make partial repayments, hence slipping under the radar.

The Resolution Foundation recommended that the Bank of England resist a rate rise until there is definitive evidence of a sustainable, broad-based recovery.

It also campaigns to improve living standards for those on low and middle incomes, saying that poorer households should have the opportunity to lock into low rate mortgages for a set period in the future.

Despite pressure from business leaders for a hike, the Bank say they will keep rates at 0.5% for now, due to concerns that the UK economy is still too weak.

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