Disposable income tumbled this year for more than two thirds of British households, while the number of people struggling to pay their rent or mortgage is at the highest level for 13 years, according to a report published today by the Bank of England.

A surge in the cost of food, energy and home loans left 71 per cent of homeowners and tenants with less money to spend in September compared with the same month last year, and nearly one in three homeowners said that their disposable income had dropped by £100 or more each month, the Bank's quarterly report showed.

The financial crisis coupled with the worsening economic outlook has placed more pressure on borrowers, with 13 per cent of households reporting that they had found it difficult to meet their housing costs, up from 9 per cent in 2007, the highest figure recorded since the Bank started its survey in 1995.

More than 40 per cent of households said that they were finding some difficulties in meeting one or more of all their household bills, with 6 per cent of homeowners saying that they had fallen behind with their payments. A further 8 per cent of those in rented accommodation said that they were in arrears with some or many of their payments.

Borrowers are also struggling to meet the cost of additional unsecured debts, the Bank reported. Nearly 15 per cent of consumers with credit cards or unsecured personal loans said that the debts were a heavy burden - the highest proportion since 1995. The number of people finding their outstanding borrowings “somewhat of a burden” soared from 26 per cent last year to a new high of 34 per cent.

The number of households owing money on unsecured loans rose to more than 50 per cent, up from 43 per cent in 2006. British consumers now owe an estimated £400 billion in unsecured loans, and a further £1.2 trillion on mortgages.

Hard-pressed consumers have been hit by the spiralling cost of energy, food and home loans. There were hopes that the aggressive cut in interest rates since September could ease the pressure on some homeowners as variable-rate mortgage bills fell, but lenders caused outrage when they failed to pass on the full rate cuts to borrowers.

HBOS, Britain's biggest lender, which has received billions in taxpayers' money, cut its standard variable rate (SVR) by only 0.25 percentage points this month, despite the Bank's 1 percentage point rate cut. A borrower with a £150,000 loan pegged to the SVR will be forced to pay £765 more a year than if the full rate cut had been passed on.

Government hopes that consumer spending, the engine room of the economy, could help to ease the country out of the recession were dented as the Bank report showed that more than half of households struggling to meet their bills were cutting back.

Fears among homeowners that they may not be able to access credit if they need it, because of the tighter lending practices by banks and building societies during the credit crunch, have also prompted more people to scale back their spending. About 16 per cent of households said that they had cut back spending because of concerns about accessing credit, up from 12 per cent in 2007.

Recent figures from the high street indicate that the Government's 2.5 percentage point cut in VAT has so far failed to reignite consumer spending in the run-up to Christmas. Tumbling house prices are also taking a toll on borrowers, with 500,000 homeowners plunged into negative equity as property values continue to slump.

The report also revealed discussions at the Bank of England over whether to adjust the remit of the Monetary Policy Committee by changing the target measure of inflation to “core inflation”, which strips out volatile food and energy prices. The current target measure, based on the consumer prices index, is 2 per cent, but some economists forecast that it will tumble below

0 per cent, raising fears of deflation. Panellists on a monetary policy round table argued that the switch would make it easier to measure the MPC's performance, since changes in the Bank base rate have a more direct impact on “core” inflation. But the suggestion was dismissed as it was not obvious that the policy would have changed the MPC's actions over the past year.

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