Blundering minister exposes secret Government fears that house prices are set to fall by ' 5-10% at best' this year

Caroline Flint walked into a Cabinet meeting carrying notes which showed prices could fall up to 10 per cent this year "at best".

Her notes, contained in a transparent folder clearly visible to Downing Street photographers, went on to warn: "We can't know how bad it will get."

Scroll down for more...

Whoops: Ms Flint unwittingly reveals the Government's private fears over house prices

It was either an amateur mistake by the smiling Miss Flint or a conveniently timed diversion just hours before the Government had to make a U-turn on the 10p tax fiasco.

No10 was said to be furious at the blunder, the latest in a series of disasters for the Government.

The notes, filling an A4 sheet, made a nonsense of Labour's repeated claims that the housing market is not in meltdown.

Just a few weeks ago, Miss Flint insisted: "The fundamentals of the housing market remain strong, with high employment, low interest rates and long-term demand for homes from firsttime buyers."

But 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."

Scroll down for more...

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'

It added that housing market surveys will show prices plunging "at best down five to 10 per cent year-on-year".

The note also revealed Miss Flint will announce 'a package of measures' to help first-time buyers today.

These will probably include changes to shared equity schemes but not a significant change to stamp duty.

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.

Ironically, the gaffe emerged on the day the Government's own figures showed house prices are still rising.

The figures claimed 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 crash of 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.

Scroll down for more...

"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 confidence.

"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 hardpressed home owners."

And the LibDems' Vince Cable added: "Now we know the Government itself believes that prices will fall by 5 to 10 per cent this year, it is difficult to believe that 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."

Miss Flint was forced to issue a humilating explanation later.

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 this note simply reflects what external analysts

have said publicly - they are not Government predictions."

The blunder came on the day came on the day of another blizzard of bad news about the housing market.

The number of people who managed to get a mortgage to buy a home has nearly halved to its lowest level since records began.

Just 46,500 people took out a loan for house purchase in March according to the Council of Mortgage Lenders.

The shortfall is the result of homebuyers losing their nerve and deciding to rent, or failing to get a loan.

Housebuilders are also feeling the pinch. Yesterday Redrow blamed the "severe restriction" of mortgages for a slump in reservations and a rise in cancellations, especially since Easter.

Persimmon, has axed plans to build on new sites until the mortgage drought ends.

But in a welcome move, Nationwide, Britain's secondbiggest mortgage lender, and Northern Rock cut the rates on some mortgages by up to 0.3 percentage points.

But the cheaper loans will not help those still unable to get a loan because lenders are cutting back.

It is now only possible to get a loan if you have a big deposit, with many cheap rates dependent on a 25 per cent deposit.