A 0.5% cut in interest rate is now imperative or rapidly deteriorating conditions in the housing market risk causing a serious economic slowdown, a situation unique in living memory that needs a fresh approach - HBF warned yesterday.

In the three previous post-war housing slumps, sharply higher interest rates and economic recession brought the housing market to a halt. A severe housing market slowdown, driven primarily by a halving in mortgage availability, risks driving the economy into a deeper slowdown than the Bank of England anticipates.

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A cut in interest rates would, as the Bank acknowledged in its latest Inflation Report, 'increase the funds available for lending' and help alleviate the mortgage crisis. This is a vital first step in arresting the falling housing market.

John Stewart, Director of Economic Affairs at HBF said: "Previous economic crises have led to housing market slumps, but this time the cart is leading the horse, with the speed and depth of the downturn threatening a serious wider economic crisis. We just cannot rely on lessons learnt and solutions based on past downturns as this is a completely new situation in which we find ourselves."

The speed of the slowdown is unprecedented and has shocked even experienced members of the home building industry. Quarterly mortgage approvals for house purchase have fallen by 43% since their peak at the end of 2006. By this stage in the 1988-92 housing slump, approvals had fallen by only 32%.

(CD/JM)