Cable warns Government of housing market crash

1.41.12pm UTC (GMT +0000) Thu 13th Dec 2007

Housing affordability for people with new mortgages reached its lowest level for 15 years in October as borrowers had to spend significantly more of their income on mortgage costs than they did at the start of this year.The Council of Mortgage Lenders yesterday said first-time buyers spent 20.6 per cent of their income on mortgage interest in October, up from 20.4 per cent the previous month. The latest data showed that total lending had so far remained robust, but this reflected still high house prices and the large numbers of mortgages granted before the full effects of the credit squeeze were felt.

Liberal Democrat Acting Leader Vince Cable said "Ministers can no longer ignore the possibility that millions of people could face the misery of negative equity and repossessions if the housing market turns. The Government must work with the major banks to put in place preventative measures to stop a housing crash. This could include working with the banks to keep families who are in arrears in their homes through properly regulated leaseback, or shared ownership schemes. The Government should incorporate house inflation into CPI and ensure that banks lend responsibly rather than behave like casinos."