Government Must Take Action To Prevent House Market Crash - Cable

1.17.00pm GMT Wed 5th Dec 2007

Responding to reports that UK house prices have fallen for the third month running, Liberal Democrat Acting Leader and Shadow Chancellor, Vince Cable MP said: "This is more evidence that the bubble is about to burst.

"With the credit crunch biting and the economy slowing we could see millions struggling to pay their debts, leading to mortgage arrears, repossessions and negative equity.

"The Government needs to work with the banks to put in place preventative actions to stop a crash in the housing market.

"Gordon Brown's reputation is built on economic growth but it appears that his reputation may now start to crumble."

Notes

1. Actions proposed by the Liberal Democrats to turn a possible housing market crash into a soft landing include:

· Inflation targeting has to include asset markets, notably housing. Currently the CPI excludes housing costs. Hence interest rates rise too little too late and could fall too little too late.

· A joint bank repossession operation aiming to keep most families in mortgage arrears in their homes and homes off the market; switching perhaps to shared (part rent, part buy) ownership, orchestrated by the Government.

· Regulatory emphasis on what the Chancellor calls 'old fashioned lending'; mandatory bank reserves adjusted to reflect the asset market cycle; FSA guidelines on lending practices in relation to borrower's income and property values.