Liberal Democrat Shadow Chancellor Vince Cable believes the 2.5 per cent fall in house prices recorded by Halifax is only the start of a market downturn.
He says: “These figures confirm the market was overvalued and due a painful correction. But we are only at the early stages of a market fall. The wheels are clearly coming off Brown’s economic wagon.
“The Government is only just waking up to the problem, despite the fact it has been warned for years that there were great economic dangers from the bubble in the housing market, linked to exceptionally high levels of personal borrowing. For too long this Government did nothing.”
Cable says it is essential the Government provides liquidity to keep the flow of loans going but he insists banks cannot be allowed to wriggle out of losses.
He says: “It is right that priority should be given to maintaining this flow of credit however it must be made absolutely clear that this is conditional on banks accepting the losses from their bad loans and not offloading these on to taxpayers via the Bank of England.”
He says it is clear falling house prices are linked to the difficulties many borrowers are having paying debts and predicts an epidemic of repossessions unless the Government takes swift action.
He says: “Large numbers of households simply cannot afford to pay. There will be an epidemic of repossessions unless the Government forces mortgage lenders to moderate the process by offering shared ownership and payment holidays to keep people in their homes. Ministers should also consider how social landlords can be helped to buy up property to prevent a fire sale in the housing market.”
Conservative Shadow Chancellor George Osborne says: “Today is the day that millions of homeowners are confronted with the consequences of Gordon Brown’s economic incompetence. This week, instead of being able to help people, Labour are putting up taxes on millions, including the lowest paid in Britain. Gordon Brown failed to prepare, he borrowed in a boom and allowed the debt bubble to grow. Now the whole country is paying the price.
“Homebuyers will be astonished that Gordon Brown has so little to offer them today. The very least he could do for those struggling to get on the housing ladder is to adopt our plan to take nine out of ten first time buyers out of stamp duty – and we will support him if he introduces our measures.”