The downturn in the housing market is more than just a blip and looks set to continue. Many UK homeowners could be facing negative equity and even repossession.

This is the gloomy outlook of the Liberal Democrats reacting to the Bank of England’s latest figures, which state mortgage approvals have fallen by 40%.

"As the credit crunch continues to restrict lending and with many people saddled with masses of personal debt, a dramatic fall in mortgage approvals was inevitable,” comments, Vince Cable Liberal Democrat Shadow Chancellor. “As house prices continue to fall and mortgage costs rise, we are in real danger of returning to the woes of the Tory recession with large numbers of families suffering negative equity and repossession.”

According to the Bank of England the number of loans approved for house purchase was 73,000 in February (January: 74,000). 111,000 remortgages were approved (January: 118,000).