The pound has declined following news that a UK mortgage lender has been forced to approach the Bank of England for a crisis loan.

Sterling is at a 14-month low of 68.65 against the European currency, according to Bloomberg figures.

The slide came after Northern Rock - one of the largest mortgage lenders in the UK - encountered credit difficulties.

Westpac Banking currency strategist Sean Callow told the news agency that the development is "a blow for sterling".

Meanwhile, Reuters has reported that weak UK housing data has also served to damage the position of sterling.

Markets are reportedly taking the news as a sign that interest rates in Britain have peaked and may be on their way down.

Yesterday, the Royal Institution of Chartered Surveyors reported that demand for housing has dropped.

The body warned that the market is likely to "soften further going into the autumn".