There’s been a noticeable increase in the number of would-be borrowers being either declined for a loan or finding the amount offered being significantly reduced as a result of having taken out a payday loan.

This is according to John Charcol which said that, although payday loan lenders have now been warned by FCA chief executive Martin Wheatley that tougher regulation is coming on 1 April 2014, a lack of any warning about the impact on the future potential to obtain a mortgage is a glaring omission.

John Charcol’s Simon Collins said: “You can’t turn on your TV these days without being offered a short-term loan.

“On the face of it at least, payday loans are pretty straightforward (despite the astronomical APRs), with a staggering number of people taking them, but beware the law of unintended consequences; there is a danger that lurks within. Mortgage lenders hate payday loans.

“As far as most mortgage lenders are concerned, if you’ve taken a payday loan then this is irrefutable proof that you are living beyond your means. End of discussion.”

A recent payday loan is a massive negative in the eyes of mortgage underwriters but one that no one warns borrowers about.

The regulator is looking to introduce mandatory affordability checks, a restriction on continuous payment authorities and limiting the number of loan roll-overs to two. It also wants tighter restrictions on what payday lenders can say in adverts and will ban any that are misleading.

Although a payday loan does not categorically mean borrowers won’t be able to get a mortgage, Collins said it makes it very difficult: “Let’s be clear. A recent payday loan on your credit history doesn’t mean that you can’t get a mortgage but it almost certainly rules out most of the major high street lenders. And elsewhere, if a mortgage offer can be agreed, the rate is unlikely to be particularly competitive.

“The whole payday loan situation is a perfect example of the lack of financial education in the UK. There’s plenty of regulation, along with abundance of wordy small print, but no one to really explain the actual consequences of how things like payday loans can affect you, and your financial position.

“Even the new chairperson of the Financial Services Consumer Panel thinks they’re perfectly ok in certain circumstances, and that using one to pay for a night out is exactly the same as putting the cost on a credit card! So it’s buyer beware, because no one else will tell you.”