On July 5, the Bank of England raised its lending rates for the fifth time in a year, sending rates to 5.75 percent, the highest level in six years. This is unwelcome news as families experience the biggest squeeze on incomes in a generation.

Rising interest costs are about to take a huge bite out of hundreds of thousands of families across Britain. Approximately 2 million households have adjustable-rate mortgages that are set to ratchet up over the coming months.

Average house prices have gone up by 155 percent since 1997, while wages have risen only 18 percent over that time. To cope with higher purchasing costs, millions of home buyers took out lower-rate adjustable loans.

Now that rates have risen, many homeowners are having trouble with their mortgage payments, many of which have already jumped 30 percent or will in the near future. Consequently, delinquencies are skyrocketing. Repossessions are also rising fast, though they are still shy of levels seen during the 1990s housing crash.

Experts warn that higher interest rates will likely drag on the housing market as families realize they can no longer afford their homes and are forced to sell.

Statistics from the National Debtline, a charitable consulting agency for people with debt problems in England, Scotland and Wales, are astounding. The year before Tony Blair’s Labor Party came to power (1996), Debtline received 60,000 calls for help. Over the next eight years, the annual number more than doubled to 130,000. Just two years later, the number of callers doubled again to 270,000 in 2006. Recent interest rate increases are expected to push the number even higher this year.

But mortgage-related shortfalls only make up part of financial problems facing Britons. Of the 270,000 callers to Debtline last year, 66 percent have credit card and other bank debt burdening them. The number of court judgments served for non-payment of debts soared to a 10-year high during the first quarter of this year.

While Britons continue to borrow more and spend more, the national savings rate has plummeted into negative territory—the worst level since records began in 1960. Even including employers’ contributions to pensions, the national savings rate is only 2 percent. Officially, inflation in Britain is running at around 2.5 percent, which means that even with employer contributions, the average Briton’s savings are eroding, as families are choosing to dig into their savings to finance their everyday spending.

Personal debt levels in Britain have ballooned so quickly (hitting a record £1.38 trillion) that the British Tory party initiated an investigation to determine why Britons on average owe twice as much as continental Europeans.

Such widespread debt levels are dangerous. Adjustable-rate mortgage time bombs resetting en masse over the next year will exacerbate the situation. For more on how you can endure the coming financial blast, read “Storm-Proof Your Financial House.”