20 February 2008
A gloomy forecast for consumers has been given by one of the UK's top economists.
Kate Barker, a member of the Bank of England's Monetary Policy Committee (MPC), said that falling house prices and borrowing for mortgages represented big threats for the economy.
She added that the credit crunch - caused by the collapse of the US sub-prime market last summer - could be to blame for economic slowdown.
The MPC meets at the Bank each month to set the base interest rate - which in turn affects mortgage, savings and personal loan rates.
Tightening credit conditions could make borrowing - whether for a property or through unsecured lending - more difficult to find on the high street.
"If credit tightening were to prove more severe than in the MPC's present central projection, leading to a significant fall in lending to households and companies, this could prompt a further decline in property values," Ms Barker said.
"The consequent adverse impact on growth could prove difficult to turn around quickly, potentially resulting in a protracted period of low output growth and below target inflation."