House prices won't crash - Brown

GORDON BROWN has dismissed widespread fears of a house price crash. The Chancellor played down warnings that the bubble is about to burst, leaving thousands facing misery.

Speaking during a weekend meeting of the International Monetary Fund and World Bank in Washington, he said a crash was unlikely while the economy was stable and mortgage payments were a much lower proportion of homeowners' income than before the last crash.

But the Chancellor was accused of being 'extraordinarily complacent' by Liberal Democrat spokesman Vince Cable.

And analyst Tony Dye said of Brown: 'He would say that, wouldn't he? House prices are going to fall. It's hard to know when but they will.'

The IMF has already warned that UK house price rises are becoming unsustainable. But the Chancellor rejected the criticism. He said the percentage of households' disposable income being spent on mortgage repayments is now only half what it was in the early 1990s, while interest rates were at their lowest for 40 years.

He also insisted that today's stable economic environment makes a crash much less likely. Brown said: 'We have achieved a greater degree of stability in the economy. I am confident that...not only can we sustain it but we can see growth and we can secure the benefits of the world upturn.'

Senior Treasury mandarins say a shortage of property and low unemployment are key factors ensuring there will be no house price crash.

But experts say Brown's rosy view is wrong and things will change dramatically if interest rates rise as predicted or unemployment goes up. Critics also point out that, while mortgages may be affordable, Britons have more non-mortgage debt than ever before.

House prices have risen by almost 20% in the last year alone and the average home now costs more than £150,000. Analysts say a sharp fall is needed to bring prices down to what first-time buyers can afford.

The LibDems' Cable said: 'The current debt position of households is sustainable only if economic conditions remain as they are. If interest rises or income growth falls, many families will be in trouble.'

Tory Shadow Chancellor Oliver Letwin said: 'The IMF, like the Bank of England and almost everyone else, is right to be concerned about the sustainability of the house price boom. The most worrying aspect is that this boom has encouraged a rise in household debt.'

Dye, who won the nickname 'Dr Doom' when he first forecast the collapse of technology stocks during the 1990s, claimed earlier this month that house prices could fall by up to 30% over the next five years. But banks and estate agents say the worst that will happen is a gradual slowdown.

Finance ministers and bankers at the Washington talks said the world is poised for strong economic growth. The IMF is forecasting that the global economy will grow at 4.6% this year and 4.4% next year, the fastest back-to-back years of growth in a decade.