Credit crunch? It's going to get to a whole lot worse, warns investment guru George Soros

Billionaire investment guru George Soros today warned that Britain has yet to suffer the worst fallout from the credit crunch.

The "acute phase" of the global crisis may have passed, but the real economy is only just starting to feel the impact.

Mr Soros said the world was set for a period of "greater instability" with UK house prices likely to fall, and no-one could know how bad it would get.

Delivering his gloomy assessment on BBC Radio 4's Today programme, he insisted: "There is a much greater degree of uncertainty in financial affairs than we recognise. The degree of uncertainty is also uncertain.

"Over the last 60 years we have had a pretty stable situation and I think we are entering a period of much greater instability, because we have got the threat of recession and at the same time the threat of inflation."

Mr Soros said there were likely to be "very different conditions over the next few years than over the previous quarter century".

He explained: "We've had a pretty serious crunch but the acute phase is behind us and now we've yet to feel the effects.

"In the case of the UK we've had a housing bubble that in terms of price increases has been greater than in the United States.

"That's also now going to be corrected - it is taking longer than in the States because you haven't had over-building like in America."

Mr Soros said property prices relative to people's income were higher in Britain than "anywhere else in the world".

He added: "Now banks are no longer willing to lend as freely as they did before."

In a separate development, First Direct - which is part of HSBC - has resumed mortgage sales to new customers, seven weeks after it withdrew deals saying it had been overwhelmed by applications.

The internet and telephone bank withdrew its mortgage range from new customers on April 1, as it had received five times the usual volume of applications.

It said the "unprecedented" level of business meant it was taking longer than usual to process applications so the temporary withdrawal would give it time to clear the backlog.

It announced yesterday that it was able to resume selling mortgages to non-customers.

Chief executive Chris Pilling said: "Last month we took the bold decision to withdraw from mortgage sales to non-customers to allow us to process the huge number of inquiries we had received and focus on the excellent service we want to provide for our customers.

"We've now assessed all the loan applications outstanding from April 1 and earlier and let everyone know the outcome."

He added: "We've honoured the fixed interest rates available when people first contacted us about their mortgage."