Brown: House price crash 'containable'

Gordon Brown has spoken out to calm economic fears as house prices continue falling and the mortgage market grinds to a halt.

The prime minister said the current state of the housing market is far removed from the crash of the early 1990s, with interest rates lower and repossession levels a "fraction" of what they were.

Speaking on BBC Radio 4’s The World at One, Mr Brown explained the current price falls need to be put into perspective.

"We’ve seen house prices rise by about 180 per cent over the last ten years. I think they’ve risen about 18 per cent over the last three years, so a 2.5 per cent fall is something that is containable.

“The issue is can we ensure that growth is maintained in this economy, that we can get the housing market to continue to move forward."

He added: "First of all, let’s be clear. There were 200,000 repossessions in the early ‘90s. The figures are a fraction now of what had happened in the early ‘90s.”

“We’re talking about a different percentage of repossessions compared with what they were in the early ‘90s, and I think that’s got to be taken into account. "

However, Speaking on Channel 4's News at Noon, Mr Brown said the government would aid homeowners struggling as mortgage rates rise – despite the Bank of England cutting the base rate – and securing home loans becomes harder.

He said: “Because we have got a global credit crunch, because we have got problems that have come out of America and are affecting Britain, we need to do everything in our power to help mortgage holders, to help businesses, to help first-time buyers, to help families.

"I am determined we will provide a range of options so that people wanting to get their foot on the first rung of the housing ladder will get the chance through either shared equity or other measures that we are going to take."

The government today announced plans to provide £1,500 grants for up to 2,000 first-time buyers in the Open Market HomeBuy scheme.

Ministers and treasury advisors are due to meet with representative of the Council of Mortgage Lenders (CML) to see what UK banks can do to alleviate the situation.

“We will be meeting the CML as a government in the next few days, and we will be discussing the kind of arrangements that we can make to help existing home buyers and to help more people become home buyers,” Mr Brown told BBC Radio 4’s The World at One.

However, Labour MP George Mudie told Channel 4’s News at Noon the government seemed to be out of touch from the realities of the credit crunch.

"Gordon Brown demonstrates what should be done. I do not think the government are really up to date with how dangerous the housing situation is becoming, and housing finance," he said.

“What I think should be done is the Bank of England should put more money in as they are rumoured to be doing so, in liquidity, but should put conditions on it that it is directed towards the housing situation and the building societies behave themselves in terms of extending loans."

Mr Mudie added: "The credit crunch has hit the financial sector, it is now moving into the real economy and the first part of that real economy is housing.”

"It is hitting it with a vengeance."