Cash-strapped Shropshire families were today warned to expect more financial misery over the coming months, with another round of big fuel price rises and a tough clampdown on mortgage lending.

The Bank of England urged the nation to prepare for at least a year of lower living standards due to soaring oil costs, and said homebuyers would find it increasingly difficult to get a mortgage.

Lenders are restricting their offers and demanding larger deposits.

Deputy governor Charlie Bean claimed the cost of fuel could continue rising for another two years, and warned there was a danger of a “pay-price spiral”.

“If households and businesses start losing faith in the idea that inflation will stay low, they start building it into their pay and prices and inflation becomes much more embedded into the system,” he said.

The gloomy message was hammered home by Chancellor Alistair Darling and his American equivalent, who warned that there was no sign of an early reduction in oil and food prices.

Their forecast came after talks at the Treasury between the Chancellor and US Treasury Secretary Hank Paulson. Mr Darling warned that the slowdown would continue.

Europe’s stock markets were nursing big-money falls this morning as investors reacted by selling millions of shares.

Marks & Spencer, which saw its share price plummet by 25 per cent yesterday after a shock profits warning, was down a further four per cent.

And computer software chain Game saw its shares fall despite a 28 per cent sales rise on the back of hit products such as Grand Theft Auto 4 and Nintendo’s Wii Fit.

There was some optimism from Aga Rangemaster, which makes its Aga and Rayburn cookers in Telford.

The company said it was making “good progress”, with sales of Aga cookers growing in the first six months, and Rangemaster business up five per cent in a difficult market.

The price of oil was today hovering near its record levels, with the cost of a barrel above 145 US dollars.

Spiralling oil prices are blamed for rising inflation, and analysts said it could provoke an interest rate rise from the Bank of England to slow down spending – piling more misery on families with variable-rate mortgages.

By Carl Jones and John Hipwood