With the Bank of England base rate set to continue to rise – some commentators have suggested rates could climb to 8 per cent – more and more people are starting to feel the pinch. One answer for many people is to consolidate debts into their mortgage. However, whilst this can look attractive, in the long term it could prove to be a costly mistake.

Homeowners looking to transfer debts racked up on credit cards, bank loans and overdrafts to their mortgage could risk getting sucked ever deeper into a debt quagmire.

As an easy way of managing debts, consumers often opt to consolidate all their liabilities in one place, with homeowners being able to add the whole lot to their mortgage. And, on the face of it consolidating debt into your mortgage can look very attractive.

For example, add a debt of £15,000 into your 25 year repayment mortgage and your mortgage payment is likely to increase by just over £100 per month – you might think that’s a small price to pay to lift the burden of your credit cards and other personal debt. However, before you jump in with both feet remember that the monthly repayments are only kept so low because you have extended the repayment term to match your mortgage meaning that in the long run you will pay substantially more interest.

As a comparison, if you were to instead opt for a personal loan of £15,000 over a shorter period – say 5 years – then whilst your monthly repayments are likely to be higher – around £300 per month – the total amount you will repay will be significantly less. On the personal loan you are likely to repay a total of just over £17,500 whereas the mortgage repayments will come to a whopping £33,000 over 25 years – nearly twice as much. Enough to make you think twice!

Recent statistics from Halifax Bank also point to more and more homeowners staying put and extending their properties, rather than copping all the expense of moving.

But that means expensive extensions, new kitchens, bathrooms and such like could result in an additional £20,000 or so being added onto the mortgage. In many cases it could be cheaper in the long term to negotiate a personal loan, thus restricting the number of years over which interest will be paid on the loan.