Cable gives house price warning

http://news.bbc.co.uk/go/rss/-/1/hi/uk_politics/7813933.stm

Version 0 of 1.

Vincent Cable has warned that house prices could fall by a further 20% as negativity about the housing market shows no sign of lifting.

As figures show prices dropped a record 15.9% last year, the Lib Dem treasury spokesman said government efforts to stabilise the market were not working.

Ministers have urged banks to make more mortgage loans available while helping people struggling with repayments.

But the Tories warned of more cases of negative equity and repossessions.

'Further falls'

Average house prices are now 18% lower than their peak in October 2007, according to Nationwide.

But many experts believe last year's dramatic house price falls - steeper than those seen during the early 1990s - could be replicated in 2009.

Prices have now fallen nearly 20% from their peak and may well have just as far to fall again Vince Cable <a class="" href="/1/hi/business/7812108.stm">Nationwide's price analysis</a>

The head of Barclays said last month that the UK may only be "half way through" the current realignment in house prices and that the market could fall by a further 15%.

Many experts believe there will be another double-digit percentage fall in prices in 2009 although a few think the market could start to recover in the second half of the year.

While Nationwide has not made any predictions for 2009, it has said that prices have "further to fall" as unemployment increases and the scarcity of affordable mortgages continues to deter potential buyers.

Reacting to the figures, Mr Cable said: "Prices have now fallen nearly 20% from their peak and may well have just as far to fall again."

"Although ministers are talking the talk on mortgage equity and repossessions, in practice the ideas are not being followed through."

Mortgage assistance

The government has announced a raft of measures in recent months to help struggling homeowners, with priority given to ensuring that homes are only repossessed as a last resort.

A scheme allowing homeowners who suffer a big fall in income to defer interest payments on their mortgages for two years is due to come into effect early this year.

Nevertheless, the Council of Mortgage Lenders expects repossession levels to rise sharply to 75,000 this year and for the number of people falling behind on their mortgage payments to grow considerably.

At the same time, the volume of house sales is expected to continue to head downwards in the first part of this year.

The Conservatives said a failure to get banks lending again lay at the root of the lack of confidence in the housing market.

"Gordon Brown's bank recapitalisation package is clearly failing to kick-start lending," said shadow Treasury secretary Philip Hammond.

"We won't shake off this recession until banks are willing to start lending again to would-be homebuyers."

The government, which controls a large chunk of the mortgage market after last year's bailout and nationalisation of leading banks, has not ruled out injecting further capital into banks to spur lending.