As the Bank of England meets this week to decide whether or not to increase interest rates again, further evidence has emerged that the five earlier rises are beginning to take their toll.

An increasing number of households are having to raid their savings as they struggle to cope with higher mortgage payments and living costs. The Saving Britain Report from Birmingham Midshires found that consumers have withdrawn an average of £400 from their savings accounts over the past three months – a 14 per cent increase on the amount taken out in the last quarter of 2006.

Interest rates have gone up from 4.5 per cent to 5.75 per cent over the past 13 months. If the Bank of England votes for a further quarter point rise this week, Bank rate will hit 6 per cent - its highest level for seven years.

Jason Robinson at Birmingham Midshires said: “Homeowners definitely seem to be feeling the pressure from higher interest rates. The main reason why people are having to dip into their savings is because of over-spending on their current accounts and much of that is likely to be down to the fact that the burden of monthly bills it getting bigger and bigger.”

Figures released today from the Confederation of British Industry revealed that consumers are cutting back on non-essential spending. Sales on flights, holidays and beauty treatments dropped over the past three months. High street retailers also report tough trading conditions.