Credit Crunch will last till 2010

THE credit crunch will keep biting until 2010, a top bank boss has warned.

Andy Hornby, chief executive of Britain’s biggest mortgage lender HBOS, said he believed the down-turn “will take 18 months to play through the system”.

He added: “We’ll see considerable slowdown in GDP, and we’re also looking at a period of strong house price deflation—stronger than the early 1990s.”

In a further blow to the economy, new figures revealed the Government has plunged Britain £5.4billion further into debt since the beginning of this summer.

Meanwhile cash-strapped families are being hit by soaring inflation and house prices are expected to tumble another 20 per cent.

Embattled Prime Minister Gordon Brown last week unveiled a rescue package to revive the economy. The plan will cost tax-payers a further £5.4billion.

Damage

It includes a stamp duty holiday on houses below £175,000, which will cost £600million. A billion pounds will be spent to help first-time buyers and boost social housing.

The threshold for the basic rate of income tax will be raised, at a cost of £2.7billion. Free school meals for primary school children will cost a billion, with free laptops for poor kids adding £100million.

But experts have slammed the package, saying it could make the economic crisis WORSE.

Shadow Chancellor George Osborne said: “The consequence of all this unfunded spending will be higher borrowing, higher interest payments, and further damage to investor confidence in Britain.”