Negative equity nightmare could return to house market, warn MPs

The Liberal Democrats today warned of a possible "crash" in house prices, with millions in negative equity or struggling to repay their debts.

Acting leader Vince Cable told a Westminster briefing: "Gordon Brown's reputation is built on economic growth but there are ominous signs that the bubble is now about to burst.

"Brown's economic miracle has been over-dependent on consumer spending generated by mounting household debt, much of it secured against a grossly inflated bubble in the housing market.

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

Mr Cable, an economist and the party's Treasury spokesman, went on: "The Government's attitude to the economy has been one of hubris and complacency.

Ministers have failed to put in place any preventative actions to stop a crash.

"The Government should be working with banks to prevent large-scale repossessions and keeping families in their homes through properly regulated leaseback or shared ownership for families in arrears.

"House inflation should be incorporated into the Consumer Price Index.

"There needs to be a return to responsible lending by the banks which have recently behaved too much like casinos.

"So far Gordon Brown has avoided taking the blame for the disasters of recent weeks, but if there is a housing crash the Prime Minister will be at fault and will have to take responsibility for causing misery to millions."

The Lib Dems said 80% of UK households' debt was mortgage related.