If you thought the sub prime mortgage crisis would blow over soon, think again.

We are in for unremittingly bad news between now and June 2008, according to Ken Murray, manager of the Blue Planet Worldwide Financials Investment Trust.

As an ex-banker and a highly successful fund manager, Murray knows a thing or two about banks the world over.

Firstly, he points out that 9 per cent of US mortgage holders are on adjustable rate mortgages which are due to be re-set between now and June 2008. That represents an awful lot of households which are going to find themselves sorely pressed on the financial front, with all that this implies for retail consumption in the US.

Secondly, figures released yesterday show that US house prices fell 3.2 per cent year-on-year in the second quarter of 2007, triggering fear of more foreclosures. The toxic combination of falling house prices, tighter credit conditions and high volumes of unsold property already, can only lead to further downward pressure on house prices. Small wonder, then, that US house builder stocks have fallen 65 per cent from their peak.

Meanwhile, institutions with heavy exposure to sub prime loans, such as Barclays Capital and Lehman Brothers, have been forced to put up their hands to the problems they are experiencing due to sub prime losses and the liquidity squeeze.

As Murray says:“It’s going to get sharply worse, before it gets better. Very few banks have been open about their exposure to sub prime assets, but gradually it’s going to come out. It’s scary just how much [mortgage debt] is off balance sheet.”

And if you thought these problems were limited to the US housing market and investment banks, think again. Murray warns that the billions of pounds invested in retail corporate bond funds could be at risk.

“Investors should really be looking at what’s in these funds and unless they are invested in gilts and other Government securities, they should be thinking of selling or switching elsewhere.

“Many corporate bond fund managers have invested in high yielding asset backed securities to boost returns, but some of the banks are defaulting. The same applies to some money market funds which invested in commercial paper.”

So there you have it. According to Murray, this is the worst banking crisis he has ever seen and global stock markets will fall by another 20 per cent from current levels. Don’t say you weren’t warned.