Property: Buy homes under repo threat, Lib Dems tell government

Property: Buy homes under repo threat, Lib Dems tell government

The government should intervene to save families under threat of repossession by offering to buy their homes, the Liberal Democrats said yesterday. A scheme allowing struggling homeowners to sell their property and rent it back should be part of a package of measures to prevent a repeat of the early-1990s housing slump.

Vince Cable, the party's Treasury spokesman, said the likelihood of further falls in house prices over the next 18 months made decisive action necessary. He said tens of thousands of families could suffer unless plans were quickly put into action. He urged Jack Straw, the justice secretary, to give guidelines to the courts so that homes can be repossessed only in extreme circumstances.

The government is considering proposals to suspend stamp duty on homes worth less than £200,000 to help first-time buyers. The Treasury has also come under pressure to support an expansion of mortgage lending by underwriting new loans. Cable said underwriting such loans would be a risky exercise that would let the banks, who were much to blame for the crisis, off the hook.

He argued the government should instead target its limited resources on mitigating the worst effects of the housing downturn. "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."

Under the three-point plan, Cable said he would:

· Launch a regulated.....continued below

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mortgage rescue scheme to allow families struggling with repayments to sell all or part of the equity in their house and rent it back.

· Allow councils and housing associations to borrow money to buy up land and empty new homes for social housing.

· Give courts powers to prevent lenders rushing through repossessions in breach of the mortgage industry's code of conduct.

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