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Mortgage firms hit back as King crashes in

The mortgage industry has hit back at Bank of England governor Mervyn King&#39s warning that house prices could fall, arguing that it could spark a crash when there was little danger of one before.

Lenders and brokers say King does not need to “scare the living daylights out of people” by firing a warning to buyers and sellers, arguing that the recent slowdown has mitigated the threat of a fall in prices.

Housing expert John Wriglesworth fears King&#39s comments could even spread eno- ugh panic to cause a crash, given the hysterical press coverage he believes King would have known would ensue.

Wriglesworth says: “King is too worried. The market will slow down and peter out. His comments are dangerous and could cause a crash. He did not have to scare the living daylights out of people.”

Lenders have also dismissed King&#39s assertion, made in a speech at a CBI dinner in Glasgow this week, with Nationwide saying the likelihood of a crash is “very small indeed”. It argues that although affordability is becoming more of an issue, there is much more likely to be a period of stability or lower housing market inflation than a fall in prices.

Nationwide executive director Stuart Bernau says: “We think the likelihood of a crash is very small indeed. It is much more likely that we will see a period of stability or lower house price inflation.”

IFAs say there are no signs that the market is coming under the kind of pressure which would justify King&#39s argument.

Savills head of residential research Richard Donnell says: “There will need to be forced sellers and repossessions for prices to fall and they are not likely to happen. Interest rates will put a squeeze on incomes but people are more likely to cut back on spending than on housing.”

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