Housebuilders took a pounding after Dresdner Kleinwort claimed that the 'reckless lending and overbuilding of flats threatens recession' and widespread mortgage fraud. Daily Telegraph, The Times

Analyst Alastair Stewart, who has been bearish on the home construction sector, warned that the results season, which gets under way next week, will be 'dreadful'.

'We believe it is pay-back time for years of speculation, to which most housebuilders are now indirectly exposed,' he said.

He slashed earnings forecasts across the board and downgraded TaylorWimpey, Bovis and Persimmon to sell from reduce. His worst-case scenario is 'a multi-year slump, losses in two to three years, land write-downs, strain on cash and dividends'.

TaylorWimpey was the biggest FTSE 100 faller, tumbling 13.9 to 166.2p. Persimmon slid 34? to 705?p, Bovis shed 37 to 556?p and Bellway lost 31 to 769p.