Middle-class families are being caught in the debt trap as house prices continue to fall and job prospects diminish, a new report suggests.

Plunging property prices have cut off access to additional funds for many homeowners who relied on remortgaging their property to pay off credit-card debts and personal loans, forcing many into financial difficulties as they struggle to meet their repayments.

The proportion of homeowners being forced to declare insolvency has doubled since 2007 and is set to rise further, figures from Grant Thornton, the accounting firm, show. Homeowners accounted for nearly 70% of applications for individual voluntary arrangements received by Grant Thornton in 2008's second half, up from 58 per cent in its first half and about 35% in 2007's first half.

The Times