House prices ‘could drop another 55%’ and leave Britain bankrupt

House prices could slump by another 55 per cent, a respected City forecaster warns.

It also predicts a deep recession lasting throughout next year and a ‘very real probability’ that Britain will go bankrupt.

The report leaked yesterday from financial analysts Numis Securities says that the collapse in house prices is not ‘anywhere near over’.

They have already fallen 21 per cent from their peak, but the report says they will slump further by up to 55 per cent if the over-correction in prices is as bad as in the early 1990s.

That would leave many millions of Britons in negative equity – when their house is worth less than their mortgage.

Yesterday also saw Alistair Darling warn that there could be ‘no instant remedy or overnight solution’ to the economic crisis.

The Chancellor used a speech to prepare the ground for slashing growth forecasts that now appear wildly optimistic.

In November, he had predicted that the economy would shrink by about 1 per cent this year, before growing by about 1.75 per cent in 2010.

He is expected to tear up those predictions in next month’s Budget.

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