Blundering minister exposes Government's secret fears that house prices will fall by 10%

Mistake: Ms Flint cracks a smile but she is unwittingly revealing the Government's private fears that house prices will fall by up to 10 per cent this year

Just a few weeks ago, she publicly insisted: 'The fundamentals of the housing market remain strong, with high employment, low interest rates and long-term demand for homes from first-time buyers.'But the A4 sheet of notes, held by a smiling Miss Flint on her way into Number 10, expose this rose-tinted view masks serious worries.Downing Street was privately furious at the blunder, the latest in a relentless series of disasters for the Government.It reinforced suspicions that Gordon Brown's premiership is struggling to connect with voters who are genuinely scared about the economic crisis.One part of the note, which was written in bold, said: 'It is vital that we show that at this time of uncertainty we show that we are on people's side.'

Ms Flint's document to prompt her in a Cabinet meeting lays bare the truth about the housing crisis. One note reads: 'We can't know how bad it will get'

One angry minister described it as a 'schoolgirl error'.The note said housing market surveys will show prices plunging 'at best down five to 10 per cent year-on-year'.This means the price falls, which will alarm millions of homeowners, could be even worse.It will strike fear into the hearts of people who have bought recently, but will be cheered by others who need prices to fall before they can afford to buy.Yesterday the Conservatives accused Miss Flint of putting the already fragile housing market at even greater risk.Confidence among homebuyers is already at rock bottom, but it will be further destroyed by news that Labour itself is extremely worried.In a deeply ironic twist, the extraordinary gaffe emerged on the same day that the Government's own figures showed house prices are still rising.The disparity between her official figures and her briefing notes highlights a cruel attempt to cover up the crisis.

It said prices rose 0.1 per cent in March to an average of £217,344 - the same month that Halifax's figures showed a 2.5 per cent fall, the biggest drop in a single month since the last property crash in 1992.Shadow housing minister Grant Shapps said: 'This is incredibly destabilising. When Caroline Flint was asked about this last week, she insisted the market was in good condition.'Now we discover that privately, she's warning her colleagues of something quite different. People will realise they can't take the Government's word for it, and that's undermining to confidence.'What we're witnessing is an explosive mix of fast rising cost of living, combined with great uncertainty in the housing market.'Rather than closed door briefings to Cabinet, Caroline Flint needs to come out and make a full public statement about what she thinks the future might be for hard-pressed home owners.'

Deputy Liberal Democrat leader Vince Cable added: 'Now we know that the Government itself believes prices will fall by at least 5 or 10 per cent this year, it is difficult to believe this will do any other than add to the downward pressure which growing numbers of people are feeling in the form of negative equity and repossessions.'

On Tuesday night Miss Flint was forced to issue a humiliating explanation.She said: 'These things happen, I'm not the first person to have been caught out in this way and probably won't be the last.'But the fact is this note simply reflects what external analysts have said publicly - they are not Government predictions.'The embarrassing blunder came on the day came on the same day as another blizzard of bad news about the housing market.The number of people managing to get a mortgage to buy a home has crashed by nearly 50 per cent to the lowest level since records began.Just 46,500 people took out a loan for house purchase in March, according to the figures from the Council of Mortgage Lenders.The meltdown is fueled by a combination of homebuyers losing their nerve and deciding to rent, or failing to get a loan due to Britain's mortgage drought.In a further blow, Michael Coogan, director general, said he fears the problem is going to get even worse.The mortgage meltdown is having a dire impact on housebuilders because buyers are deserting the market, or being forced to run away after failing to get a loan.

Yesterday Redrow blamed the 'severe restriction' of mortgages for its problems, with soaring numbers of people cancelling plans to buy a home. The problem has got much worse since Easter, it said.

The number of people reserving one of the housebuilder's new properties is about 50 per cent below last years level.

It comes after another housebuilder, Persimmon, abandoned its plans to build any homes on new sites until the mortgage drought ends.

Mike Farley, chief executive, said: 'We're not going to build more when we're unable to sell what we have.'

In a welcome move, both Nationwide, Britain's second-biggest mortgage lender, and Northern Rock cut the rates on some of their mortgage deals yesterday by up to 0.3 percentage points.

But the cheaper loans will not help millions of borrowers who are still unable to get a loan due to the recent clampdown.

It is now impossible to get a loan unless you have a big deposit, with many only offering cheap rates to borrowers with a 25 per cent deposit.

Even if rates continue to come down, many people will still struggle if the new rules applied by the country's lenders do not change.