Following last month's rate rise, retailers fear consumers have reached a tipping point and are reining in their spending because of soaring mortgage bills and other outgoings.
The warnings came as research from Ernst & Young revealed that consumers' disposable income was at its lowest for five years.
After fixed outgoings, only 22.1 per cent of gross income remains available for spending. The finding coincided with a claim by Asda that the average family has monthly disposable income of only£146 after paying the bills.
Until now, only a handful of furniture retailers, including Carpetright and ScS, had warned that interest rate rises were affecting their businesses. However, this week a raft of the biggest retailers, including Tesco, Sainsbury's and DSGi, admitted that shoppers were feeling the pinch.
The highest-profile casualty was Tesco, which issued a disappointing trading statement on Tuesday. While its core food business performed well, the grocer said that growth in non-food had slowed in a 'subdued' market.
Analysts interpreted Tesco's disclosure as a sign that conditions in non-food retail are set to worsen further.
'We are forecasting that the food retailers will account for 100 per cent of retail sales growth over the next three years,' said Panmure Gordon analyst Philip Dorgan. 'This could cause a profit squeeze among the weaker non-food operators.'
Supermarkets responded to toughening conditions with a swathe of price cutting. Tesco, Asda and Morrisons have all axed hundreds of millions of pounds from prices over the past week.
Some retailers fear that the situation could worsen as the impact of interest rate hikes filter through to mortgages.
'Recent months have certainly presented us with more challenging trading conditions,' said John Lewis director of selling support Rob Collins. 'We believe that the pattern is set to continue.'
The fashion sector, which benefited from the very hot weather in April, is also having a harder time. One top fashion retailer said the past five weeks' sales had been 'rubbish' for most in the clothing sector. He said: 'It's not just the weather - there's definitely been a tightening.'