A new government report by Sir James Crosby has warned that net mortgage lending is likely to fall below zero by next year, leaving Brits paying back more than what they are borrowing.

The report finds that mortgage lending has fallen by 52% over the past year and it predicts that this figure will only increase as banks and building societies enforce significantly more stringent lending policies.

October 2008 saw new mortgage lending slump to £2.9 billion in comparison to £4.7 billion in the same month last year, with new mortgage lending and the best interest rates being reserved for so-called “low-risk” customers; those with large deposits of 40% or more and those with low LTV (loan to value) ratios.

The findings are a further blow to the ever-worsening conditions in the housing market, which have seen a marked slump in 2008 – a trend which is set to continue in 2009 despite government intervention in the form of bank recapitalisation and policy changes put forward in Monday’s pre-budget report.

The spectre of credit card debt continues to remain a concern, with card repayments once again outstripping spending.

People spent £7.1bn on their credit cards during October, the same as in September, but repayments continued to outstrip spending at £7.3bn, according to the British Banking Association, meaning that, when interest and charges are taken into account, outstanding credit card debt rose by £248m.

But borrowing through overdrafts fell slightly, while demand for personal loans remained weak at £1.9bn, 26% less than a year earlier.