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• Last 100% mortgage to disappear (08 04 2008 04:15)
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Domestic economy 'looks bleak'

The domestic economy is in danger of meltdown if the damaging conditions which currently pervade it do not lift.

That is the worry voiced by a leading personal finance expert today, who told Sky News that the looming prospect of stagflation – when stagnation and recession is combined with inflation – was the biggest threat to the UK's economic health.

Personal finance expert Jasmine Birtles says that the gloom which has settled over the economy – as the stock market slides and fears over a global recession harden – could give way to an even more damaging period.

"To be honest it does look a bit bleak," she acknowledged. "What we don’t want, and what the government doesn’t want, is what we call 'stagflation'. That is where you have a recession and an inflation.

"It is kind of that perfect storm people have been talking about," she commented.

Investors and those with pension funds linked to the stock market will be hoping that the fears prove unfounded, while the ongoing impact of the credit crunch – and the squeeze on liquidity – could have broad implications for all borrowers.

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