The O’Connor family had planned to rent a cottage in Cornwall for a fortnight this summer until they realised how much it was going to cost.

With the credit crunch and the rising cost of living starting to bite, John O’Connor, a shipping manager, and his wife Melanie, 32, will be having a holiday at home with son Sam, 3, and their eight-month-old daughter Fern.

Last year the family spent three weeks visiting relatives in Australia and had hoped that a visit to Devon or Cornwall would be an affordable alternative to a foreign break. That was before they discovered it was going to cost £700 a week to rent even a tiny cottage anywhere near the sea. Their budget is already being squeezed by increased fuel costs, food prices and mortgage payments on their three-bedroomed semidetached home in Yatton, north Somerset.

Mr O’Connor, 31, said: “The cost of everything is rising and we are starting to feel the pinch. A holiday is a big outlay so unfortunately it’s the first thing we can afford to go without. “Holidays in Europe seem very expensive at the moment because of the exchange rate and we were very surprised at the cost of self-catering breaks in England.

“Also, as we now have two children, the whole thing becomes a lot more expensive. Even driving down to Cornwall would cost a fortune in petrol.” The couple are planning on catching up with some DIY and taking day trips from home instead.Mrs O’Connor added: “We’re lucky because we’re near the coast and can still spend a day at the beach even if we’re not ‘away’ on holiday.”