People who have re-mortgaged their house to buy a new car could be left with a serious financial headache, according to Parker's Car Guides.
Buyers are being advised that they could get a far better deal if they get a standard car loan for the purchase.
A £14,000 car bought with money from a mortgage at 7.2 per cent could end up costing £30,000.
Whereas the same car bought with a standard car finance agreement at 7.7 per cent APR would cost less than £16,000.
Kieren Puffett, editor of Parker's, explains: "As house prices continue to fall and repayment rates start to rise, some car owners will find that it wasn’t such a good idea to pay for a new car with the equity of their home."
He added that unlike your house, a car will generally depreciate in value over time and people using mortgage equity could find themselves paying for a car long after it has been scrapped.
The number of people remortgaging dropped by 14 per cent between April and May.
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