Vince Cable, shadow Chancellor for the Liberal Democrats, has called for greater help for homeowners suffering negative equity.
Cable also criticised the banking industry for failing to realise its lending practices had become reckless in recent years.
Following the British Bankers Association (BBA) announcement that mortgage approvals had fallen to an all-time low, the Liberal Democrats said repossessions are likely to increase dramatically in the near future.
Cable claims the BBA figures suggest the UK housing market is in a severe slump, and further falls can be expected. He also criticised the banking industry for creating a bubble in house prices.
“I wish the BBA, which is now facing up to reality, had been equally clear-headed several years ago when it was already becoming clear that reckless, indiscriminate lending was feeding an unsustainable boom in house prices. This was bound to come to a sticky end,” he says.
The Liberal Democrats have called on the BBA to urgently work towards developing mechanisms to cushion the effects of the house price crash to protect those suffering negative equity and those at risk of repossession.
The Council of Mortgage Lenders (CML) is already predicting repossessions will rise to almost 50,000 in 2008, and many market commentators believe the devastating effects of the credit crunch could continue into 2009.
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