Housing associations 'could soften housing crash'

Social housing providers could act as "buyers of last resort" in the event of a house price crash, Liberal Democrat treasury spokesman Vince Cable has said.

Pointing to market expectations of house price falls of up to 13 per cent, Mr Cable stated in areas such as Leeds or Manchester - where buy-to-let stocks have risen greatly in recent years – providers of social housing could step in the event of a housing collapse.

Speaking in Parliament yesterday he also stated lenders should face more regulation to make repossessions harder and unsure.

"One possibility, which we are keen to promote, is for the lenders to have a much greater responsibility, so that if a default is triggered, there should be a process whereby the debtors have access to independent financial advice and the banks are required to offer a range of payment alternatives, which might include shared ownership," he said.

However, he told politics.co.uk he was against the state stepping in with social security payments saying this would "shift the burden back to the taxpayer".

Mr Cable also claimed as many as three million homeowners could be facing negative equity.

"According to the Nationwide's estimate, we have had five months of continually falling average prices.

"We have a forward market for property, which suggests that prices will fall by ten per cent this year and that, in five years, they will not increase at all - in other words, they will fall substantially in real terms.

"The Council of Mortgage Lenders confirms that three million families currently have properties with a loan-to-value ratio of more than 90 per cent," Mr Cable said.

"If the numbers that I have cited, such as the ten per cent fall in a year, materialised, all those families would be in negative equity in a year. That is happening to many people now."

He went on to blame "reckless" lending for offering high income multiples and loan-to-value levels on mortgages.