Ministers must act to help thousands of homeowners and put curbs on banks repossessing homes if borrowers get into trouble, says Vince Cable, the Liberal Democrat Treasury spokesman.
He said ministers should create a system of regulated "mortgage rescue schemes" to allow people in difficulties to sell all or part of their home and rent it back.
Gordon Brown, meanwhile, is to launch an economic recovery package within weeks as the centrepiece of his political fightback. Treasury ministers are considering measures that include a stamp duty holiday or a windfall tax on energy firms, to fund measures to tackle fuel poverty.
Mr Cable, however, attacked the Government's response as "feeble and late", adding that there was no case for suspending stamp duty. He said that "housing is at the centre of the national economic problem" and that the sharp fall in housebuilding was dragging down the expansion of social housing. The Liberal Democrat frontbencher said councils and housing associations should also be allowed to buy up vacant property for new social housing.
He said repossessions were running at about half the 75,000 of 1997, and added that ministers should ensure that seizing a home was only the last resort; the last Tory government stopped social security mortgage payments.
Mr Cable urged Jack Straw, the Justice Secretary, to issue new rules to courts that would make lenders offer independent advice, shared equity schemes and access to current mortgage deals before asking for repossession. He said: "The Government seems obsessed with fighting a losing battle to artificially prop up the housing market."Reuse content