Government attempts to get banks lending again are unlikely to prevent the borrowing drought crippling UK households and businesses from continuing.

The Bank of England said that banks and building societies anticipated a further tightening in the availability of credit to individuals and firms in the first three months of this year.

Lenders are being cautious in light of the depressed economic outlook and its potential impact on defaults, according to the Bank's quarterly credit conditions survey.

Mervyn King, the Governor of the Bank of England, has identified the current freeze in credit markets as one of the biggest threats to the under-pressure UK economy in 2009.

He and his colleagues on the Bank's Monetary Policy Committee (MPC) will be under more pressure to sanction another hefty cut in interest rates on Thursday.

The banks have already been offered a £37 bail-out package by the Government, and it has urged lenders to commit to offering competitively-priced loans to homeowners and to small businesses.

Homeowners are also facing other signs of a bleak 2009, with the Halifax reporting a record 16.2% fall in prices during 2008 and forecasting further downward pressure on prices in the coming months.

Meanwhile, the Nationwide announced that it would not be passing on future interest rate cuts to around 250,000 of its tracker mortgage customers.

Since the credit crunch first hit, mortgage lending has fallen steeply, with new figures released by the Bank of England showing that the number of mortgages approved for house purchase hit a new record low of 27,000 during November - only a third of the level recorded in November 2007.

For four months before that the figure had been around 32,000, so the fall dashed hopes that declines in mortgage approvals had bottomed out. It also suggested that November's surprise 1.5% interest rate cut had failed to have an immediate impact on housing market activity.

House prices are continuing to be hit by the mortgage drought, with the tighter lending criteria being employed by banks making it increasingly difficult for people to buy their first home or trade up the property ladder.

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