The chief executive of Britain's biggest home lender, HBOS, warned today that the credit crunch was likely to last until early 2010.
"My personal view, for what it's worth, is that it will take 18 months to play through the system," Andy Hornby told the BBC in an interview.
The current financial crisis was precipitated by the collapse of the US sub-prime mortgage market and Hornby predicted any revival would be intimately linked with a recovery in the US housing market.
"It's going to take 18 months before US house prices have started to rise again - which is what's required for banks to have the confidence to start lending again. It will take a long time to play out.
"What will eventually bring wholesale funding markets back is when US house prices start to rise and then people will believe the underlying value of asset backed securities is likely to stop falling and the system will start to untrap."
Analysts expect UK house prices to tumble at least 20 per cent from their peak as the decade-long boom shudders to a halt and Hornby was equally pessimistic in his outlook.
"Over the next 18 months 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.
"But I don't believe unemployment levels will be as high as they were as the early 1990s and that is going to be a very important underpin in terms of people's ability to pay their mortgages."
Hornby also warned banks' shareholders must be prepared to accept lower returns as the industry adopts a more conservative strategy.
"Banks' models will be altered for the long term and right across the international spectrum they'll fund more of their growth from customer deposits and rely less on international wholesale funding markets as the source of long-term growth.
"That means we will plan for slightly lower growth than you have seen in previous credit cycles."
In July HBOS posted an underlying pretax profit, including the negative adjustments, of £1.45bn in the first six months of the year, down from £2.96bn in the same period of 2007.Reuse content