The report from Lord Turner about how he proposes the Financial Services Authority should change the way it polices financial services, says much about the mortgage market.

His main two points were that mortgage lenders must reduce the amount they lend relative to the value of the property and also relative to the borrowers income. Sounds like good sense? Yes, but we all now know his advice comes with hindsight and too late.

Thanks to lax regulation in the past, we have arrived at a crisis situation where mortgage lenders are over re-acting. Thousands and thousands of families cannot remortgage because the lenders have ferociously cut back their lending. In almost one bound, we have gone from a situation where lending was handed out like sweets to one where even the most financially solid households cannot find a mortgage.

The have been times before when first time buyers have experienced difficulties funding their home – but never as bad as now. Unless a prospective borrower has a big salary or a huge deposit, or both, then they simply don’t stand a chance of owning their own home.

So you do not have to be a genius to work out what is flushing the housing market down the drain. Without a working mortgage market there will be no housing market and house prices will continue to spiral down. That could spell disaster for the whole UK economy.

House prices could fall a long way from where we are now and we are already 25% off the top of the market experienced in late summer 2007. Are we talking about another 25%? If you ask me, we could be talking about 40-50% unless the Chancellor gets confidence back into the capital markets and a more liquid mortgage market develops.