Lib Dems: Possible house price crash

Rising interest rates and low mortgage approvals could be warning signs of a house price creash, the Liberal Democrats has suggested.

Commenting on Bank of England figures showing that the rise in consumer debt slowed to only £9.4bn in April and that there was a third monthly fall in the number of new mortgage approvals, Liberal Democrat Shadow Chancellor, Vince Cable MP said: “This shows that higher interest rates are starting to bite. This is backed up by analysis from the leading banks.

The concern is that this slowdown could be part of a much messier process in which house prices start to fall sharply as growing numbers of people are caught up in negative equity and arrears problems, as happened in the early 1990s.

“So far this has not happened, but there is a degree of naive optimism in the lending industry and government that there is bound to be a soft landing.

“I am concerned that because many homeowners lack proper insurance, and because of the current irresponsible lending practices, there will be painful consequences over the next few years.”