Ernst & Young's Annual Discretionary Income Study reveals that after tax contributions, mortgage payments and monthly household bills, the average family has about 22 per cent of its gross income left over, as opposed to more than 28 per cent in 2003.

The survey shows fixed monthly household costs account for more than half of a typical household's gross income. Council tax and pension contribution payments have also risen faster than inflation.

Although wages and salaries have risen recently, those improvements have not been sufficient to keep up with the "fixed costs" of living - income taxes, energy bills, the council tax, and the cost of servicing a mortgage. The residential property boom and higher interest rates, in particular, have made a dramatic difference to the amount left to families to spend as they wish. The monthly cost of mortgage payments for an average family are up 65 per cent on five years ago (from £423.58 to £698.85).

"Increasing mortgage payments, driven by the four interest rate rises since last August, are having the biggest impact on the consumer," said Tim Sleep, at Ernst & Young, who also points out that many homeowners coming off fixed-rate deals will see their mortgage repayment costs surge.

Strong consumer spending has powered six quarters of above-trend growth. Yet how have families done it when they're being squeezed? They've borrowed, says Ernst & Young, with the average level of unsecured consumer debt at £8,028.43, compared with £6,568.32 in 2003.

However, there are signs that such borrowing to spend could be on the wane, and retailers are concerned the spending squeeze is likely to intensify. Tesco warned the Bank of England this week not to "overdose" on interest rate increases, saying consumer spending growth was slowing and that past rate rises had yet to bite.

"The net result is that, after five years of household costs rising faster than wage inflation, the consumer is feeling highly fragile. The average family will find it difficult to cope with a rate rise," Mr Sleep said.

For now, the City consensus remains that the Bank of England will increase rates by a quarter point to 5.75 per cent next month.