Double blow for the economy

Britain's beleaguered economy today suffered a double hammer blow with new figures revealing a sharp fall in mortgage lending and spiralling levels of personal debt.The shocking extent of the UK's financial problems were revealed as the International Monetary Fund (IMF) labelled the level of overall debt as "disturbing".

The prospect of a speedy improvement seems slim because the number of mortgages approved for house purchase has dived by more than 60 per cent during the past year to hit a new record low.

New reports painted a picture of ordinary people awash in a sea of debt.

Residents are unable to borrow for personal spending because banks are reluctant to lend, despite swingeing interest rate cuts.

IMF managing director Dominique Strauss-Kahn said the level of UK debt was disturbing. He said 2009 would be "a really bad year".

Figures showed that people looking to move home or get onto the property ladder were particularly hard hit.

Just 17,773 loans were approved for people buying a home during November, 14 per cent fewer than in October and 60.7 per cent less than in November last year.

There was also a steep drop in the number of people remortgaging, with just 29,798 loans for people switching to a better deal in the pipeline, down from 52,452 the previous month.

The figure, which was the lowest for eight years, was also less than half the level for November last year.

The number of approvals for people releasing equity from their home or taking out a mortgage on a buy-to-let property also continued to fall during November to 22,295, 44 per cent less than in the same month of 2007.

Consumer credit also remained subdued during November, with people spending £6.9 billion on their plastic, while repayments of £7.1 billion continued to outstrip new spending.

But once interest and charges were taken into account their outstanding debt rose by £239 million.

Consumers' savings levels soared by £3.9 billion, but the increase is thought to have been caused partly by people who lost money through the collapse of internet bank Icesave receiving compensation.

By Andy Richardson