The size of the debt collection industry has tripled in four years as thousands more people struggle to repay credit cards and loans. Each household now owes an average of £1,000.

When people are unable to repay what they have borrowed, banks sell on people's debt to professional debt collecting companies.

According to figures released yesterday by the Credit Services Association (CSA), which represents 95 per cent of the industry, the size of the debts these companies handle has almost tripled from £8.6 billion in 2003 to £22.7 billion.

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The problem is likely to increase as people are caught by the credit crunch.

Najib Nathoo, the president of the CSA, said: "Underlying debt has gone through the roof and lenders increasingly want to move any bad debt off their books."

Experts warn that the leap in debt-collection figures is likely to lead to an increase in personal insolvencies and bankruptcies.

Meantime, the number of people taking out a mortgage last month fell to its lowest level for at least five years, further fuelling fears of a housing market slowdown.

Just over 80,000 people took out a loan to buy a property in September — the fewest number to do so in a September since monthly records began in 2002, according to the Council of Mortgage Lenders.

The trade body said £12·7 billion was loaned for house purchases in September, well down on August’s £16·2 billion.

The slowdown comes as the full effect of five interest rate rises over the past year starts to hit the housing market, with the cost of a home loan shooting up and the credit crunch making it tougher to fund a purchase.

During the month, the average mortgage rate increased to 6·02 per cent from 5·91 per cent in August.

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