Rising cost of living is hitting households hard

Consumers are increasingly having to dip into their savings to cover the rising cost of living as household finances deteriorate at the fastest rate in more than two years.

Six times as many households reported seeing their finances deteriorate in June, against with just 6 per cent who saw an improvement, according to the Household Finance Index carried out by Markit.

One in five admitted to taking on more debt during the month to cope with falling incomes and rising prices, with just 15 per cent saying they had managed to reduce their debts in the month.

The latest figures meant the overall HFI index fell to 35.1, its lowest level since March 2009 - a figure under 50 represents a decline in households' positions on the previous month; one above 50 represents an increase.

Tim Moore, senior economist at Markit, said the decline poured cold water on the tentative signs of improvement seen in the previous month.