Where's the Relief for Credit Crisis Victims?

From cities to suburbs, the endless streets of boarded-up homes, repossessed by lenders and seemingly abandoned, provide the most graphic evidence of America's growing housing crisis, induced by the collapse of the iniquitous, unregulated, sub-prime mortgage market.

In February alone, one in every 557 US households had received what amounts to a notice to quit after failing to meet repayments. Last week the Senate approved a relief package, including $2bn in community grants to buy and renovate empty homes, alongside generous tax credits for potential buyers. Although this is not supported by the president in its present form, some deal is likely to emerge. Both Democratic runners for this year's presidential election want help for the distressed and dispossessed. But what about the UK?

While ministers have maintained that the credit crunch in the UK bears no comparison to the negative equity crisis of the early 1990s, they must know that action is needed to help tens of thousands who face homelessness; at least 2 million people coming off cheaper fixed-term deals this year could be struggling to get another mortgage. That is why backbench labor MPs have urged ministers to strike an urgent deal with lenders to delay repossessions and help struggling householders through short-term difficulties.

Somehow, in the rush to rescue Northern Rock, the real victims of the sub-prime crisis in the UK - first-time buyers and those sold dodgy products - seem to have been sidelined. The Council of Mortgage Lenders, which reckons lending could be halved this year, has recorded steep increases in repossessions: up from 8,000 in 2004 to around 30,000 by the end of 2007, and maybe 45,000 by the end of this year. Sooner rather than later, a government whose housing policy has been largely based on encouraging home ownership will have to intervene. Ministers cannot argue that they were not alerted to the crisis.

Last September, a report commissioned by Shelter, the housing charity, warned that irresponsible practices by some lenders - targeting high-risk borrowers with poor credit ratings - have left the "poorest and most vulnerable" at risk of losing their homes. Its call six months ago for a safety net for householders facing repayment difficulties now seems ominously prescient.

While the level of repossessions is still lower than the early 90s, today's crisis is different. Now, it is increasingly common for non-housing debts to be secured on a borrower's home, either as a condition of taking out a loan or as an enforcement measure imposed by courts when payments fall into arrears. When that happens, warns Shelter, relief from either state welfare support or private insurance is inadequate. And, naturally, the weakest are being hit by the fallout from the UK's sub-prime sector, which became a rapidly expanding part of the mortgage market as lenders such as Northern Rock fought for market share. The nationalized Rock is now the bank that likes to say no. It is telling customers whose fixed-terms deals are ending to go elsewhere - if any other lenders will have them.

As the storm clouds darken further over the mortgage market, with vulnerable households seeing little prospect of shelter, a government relief package on this side of the Atlantic seems unavoidable. For a start, lenders must offer mortgage defaulters more flexibility and protection - and warn councils, who have a duty to house homeless people, of potential problems long before people are thrown on to the streets. But more action is needed. Shelter's call for a national mortgage rescue scheme, administered through housing associations with government support, no longer seems wide of the mark.

· Peter Hetherington writes on communities and regeneration.