Families threatened with repossession should be able to sell their homes to the Government and rent them back, argue the Liberal Democrats.

Treasury spokesman Vince Cable says that homes should only be repossessed in extreme circumstances and that unless the Government does something, tens of thousands of families could suffer.

The Government is already considering suspending stamp duty on homes worth less than £200,000 in order to help first time buyers who are finding it increasingly difficult to get on the property ladder, but Mr Cable says this isn’t enough.

He also says that plans to support an expansion of mortgage lending by underwriting new loans would be ‘risky’ and lets the banks off the hook.

“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,” he said.

The Liberal Democrats say that more practical solutions are needed and have put forward plans which “aim to reduce repossessions and increase the stock of social housing”. These plans include introducing regulated ‘Mortgage Rescue Schemes’.

“Under this arrangement,” said Mr Cable, “families struggling to pay their mortgage could sell part of the equity in their home and rent it back from a housing association or private firm.”

The plans also argue that councils and housing associations should be allowed to borrow money to buy up land and empty new homes for use as social housing.

“These plans could be funded using money already committed to social housing but currently unspent because of the collapse of new building,” explained Mr Cable.

“They would also save taxpayers the cost of re-housing the homeless without going down the disastrous route of giving open-ended guarantees for new mortgage lending.”

The Liberal Democrats also argue that courts should be given guidelines to only allow homes to be repossessed in ‘extreme’ circumstances and that the mortgage lenders’ voluntary code should be binding on all lenders.

“Ministers must act to help the thousands of families struggling to keep a roof over their heads,” explained Mr Cable, arguing that the Government needs to “tighten up repossession rules, to ensure that people’s homes are only ever repossessed as a last resort.”

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