Consumers’ disposable income has fallen by a sixth over the past four years, according to a report that highlights the squeeze on homeowners from the increase in mortgage costs, fuel bills and other essential payments.

Just 22 per cent of a typical household’s monthly income is left over after taxes and essential bills have been paid, down from 28 per cent in 2003-04, according to a study by report from Ernst & Young, the accountants.

The typical family with two children under the age of 16, with an average-sized repayment mortgage on a 25-year term at the standard variable rate, will take home just £837.53 from monthly wages of £3,790.08, the research shows.

That is down from a discretionary budget of £898.54 on a gross income of £3,205.75 in 2003-04.

Adjusted for inflation, that means that an average family has seen their disposable income – “the pound in their pocket” – drop by 17.5 per cent.

As the chances strengthened of another interest rate rise next month, the findings sparked fears that hard-pressed mortgage holders might try to increase their credit card borrowing rather than cutting back on their spending on the high street.

Frances Walker, spokes-woman from the Consumer Credit Counselling Service, said: “The people who are coming to us for help are having problems covering their unsecured debts because they are spending a greater proportion of their income on their mortgage repayments. This is particularly true of those on lower incomes.”

Tim Sleep, director of retail at Ernst & Young, said: “Big rises in household costs continue to outstrip wage inflation. Increasing mortgage payments, driven by the four interest rate rises since last August, are having the biggest impact on the consumer.

“But we are also seeing above inflation rises on a host of fixed costs such as council tax bills, water rates, pension contributions and petrol – the consumer is being squeezed from many directions.”

The findings back up research carried out by The Times in January, which found that Britons are in the grip of the tightest squeeze on their disposable income for nearly half a century.

The soaring cost of gas and electricity, mortgage repayments and transport has coincided with the heaviest personal tax burden in 20 years to curb consumers’ ability to pay for the more pleasurable items in life, it revealed.

High levels of inflation have not been matched by similar rises in wages, to the comfort of the Bank of England but to the concern of retailers.

The latest figures show that inflation stood at 4.5 per cent on the retail price index in May, but wage inflation excluding bonuses was just 3.6 per cent – meaning the typical earner has seen their gross pay fall over the past year.

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