Three million families facing negative equity; ECONOMY.
About a quarter of households face having the value of their property sink below the level of their mortgage, the Lib Dems warned.
The party's economic spokesman Vince Cable said the scenario was "plausible", and could spell disaster with the number of repossession orders filed with courts already at a "comparable level to the last slump".
The fears were raised as banks rushed to ditch cheap mortgage offers, making it more difficult for would-be buyers to get affordable credit.
Figures released by financial information group Moneyfacts.co.uk yesterday showed there were just 4,794 different products available on the market, down 40 per cent from 7,726 at the beginning of March.
Mortgages are being withdrawn on a daily basis as lenders raise their rates, reduce their loan to value ratios and cancel deals attracting too much business.
The Co-operative Bank announced it was withdrawing its two-year mortgage range on a temporary basis from the close of business yesterday .
The bank said it had seen "unprecedented" levels of demand for the products, which included a number of best buys, and it was not prepared to compromise customer service levels.
Internet and telephone bank First Direct announced this week it was withdrawing its entire mortgage range from new customers.
Opening a Lib Dem-led Commons debate, Mr Cable said experts estimated house prices would fall by ten per cent over the year, leaving many families at risk of owing more than the value of their home.
"There are currently three million families - three million - who have loan-to-value ratios of properties in excess of 90 per cent, the Council for Mortgage Lenders confirms that. If the numbers I have been describing are to materialise, all of those families, by definition, will find themselves in negative equity within a year, and many are now doing so."
Lib Dem economic spokesman Vince Cable
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|Publication:||The Birmingham Post (England)|
|Date:||Apr 4, 2008|
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