Lib Dems construct housing recovery plans

The Liberal Democrats have presented their proposals to slow the "downward spiral" in the UK housing market.

Describing government efforts to dates as "feeble", the party's Treasury spokesman Vince Cable offered three key solutions to ongoing problems.

Key among the proposals was the introduction of a regulated 'Mortgage Rescue Scheme'; allowing families struggling to meet mortgage demands to sell all or part of the equity in their property to Housing Associations or private enterprises.

While so-called 'Sale and Rent-back' schemes are already available in the mortgage market, they can leave homeowners exposed to unscrupulous providers.

Sellers are often offered little protection from eviction from their property, unfair rents, below market prices and poor advice, argues Mr Cable.

Regulation of the industry by the Financial Services Authority (FSA) would build confidence in the sector, allowing homeowners an increased range of options when faced with repossession.

Describing housing as the "centre" of economic woes, the Liberal Democrats also advocate the creation of a binding mortgage lenders code of practice to ensure repossession of property was only carried out as a last resort.

Under the proposals a court would only grant a repossession order if a lender had ensured independent advice had been given to the borrower, options to renegotiate had been explored and homeowners had been offered the choice to offer equity for sale.

It is thought this would delay the number of repossessions taking place, preventing the 35,000 carried out this year from heading up towards the 75,000 recorded annually in the early 1990s.

However, it is not the role of the Bank of England to intervene with a cut in interest rates, in the view of the Liberal Democrats.

The Bank's independence must be valued, explained Mr Cable, while cutting interest rates while inflation was increasing would also go against its remit. Furthermore, borrowers on fixed-rate deals would not benefit from any reduction.

Finally the Liberal Democrats propose the government use the present slowdown to purchase property and, more importantly, land in order to boost the number of properties available as social housing.

While the Labour government has explored this route – allocating £200 million to the Housing Association to purchase property – these efforts are viewed as "complacent and wrong" with a major expansion expected by Mr Cable.

"The government seems obsessed with fighting a losing battle to artificially prop up the housing market, rather than finding ways to deal with its worst effects," explained Mr Cable.

"Ministers must act to help the thousands of families struggling to keep a roof over their heads."

Chris O'Toole