Household finances look set to be stretched further in 2008 also by rising food and energy costs -- the oil price was once again on Friday nearing its record high -- and as wages fail to keep pace with inflation.
Accountants KPMG predicted on Friday that a record 130,000 people would be declared insolvent next year.
"Any excessive spending over Christmas and at the New Year sales, especially where goods are paid for on credit, risks tipping even more consumers over the edge," said Mark Sands, director of insolvency at KPMG.
"The credit crunch is resulting in increased rejections of credit card applications and a reduction in the availability of loans secured by a second charge on the family home. Those in difficulty will find that their options are becoming limited."
But for now, retailers appear to be reaping the bounty of any profligacy after the usual complaints of a lacklustre start to the Christmas shopping season.
Early signs were that the post-Christmas sales got off to a roaring start as retailers slashed prices.
"We suspect that this is more likely to represent the last hurrah for many consumers before they batten down the hatches in the face of serious headwinds," said Archer.
"We suspect that the strong early showing in the sales is a consequence of increasingly pressurized and price conscious shoppers being very keen to take advantage of genuine bargains and treat themselves while they can."
News of spending in the face of price cuts, however, will be good news for Bank of England policymakers who cut interest rates by a quarter-point to 5.5 percent this month to offset slowing growth but are still worried about inflation.
Most economists are predicting further cuts ahead, especially after all nine Monetary Policy Committee members were found to have voted for this month's reduction.
That still may not be enough to save the housing market. "This time around lower interest rates are more likely to stabilise market activity rather than re-ignite it," said Fionnuala Earley, chief economist at Nationwide.
