British prime minister Gordon Brown's handling of the economic crisis has seen Labour cut the Conservative lead to just eight points, according to a new opinion poll.
The latest evidence of the so-called "Brown bounce" came as official figures showed a 71 per cent rise in the number of house repossessions alongside an 8 per cent annual fall in house prices in England and Wales.
The Bank of England, meanwhile, warned that 1.2 million UK households can now expect to fall into negative equity.
The ComRes poll for the Independentshowed the Conservative lead falling by a full 11 points over two months, with Labour up two on 31 per cent, against 39 per cent for David Cameron's Conservatives and 16 per cent for Nick Clegg's Liberal Democrats.
Although some other recent polls have given the Conservatives a double-digit lead, yesterday's findings - a week before the Glenrothes by-election in Scotland - will revive speculation about a possible hung parliament after the next general election.
That will also spark interest in Northern Ireland, where the Ulster Unionist Party executive is next week expected to approve a new electoral pact with Mr Cameron.
The latest opinion survey was also conducted against widespread publicity for the so-called "Corfu affair", played out in luxury villas and aboard fabulous yachts last summer and featuring shadow chancellor George Osborne, Labour's business secretary, Peter Mandelson, financier Nathaniel Rothschild and Russian billionaire Oleg Deripaska.
The Conservative leadership sighed in collective relief yesterday as Westminster's ethics watchdog refused to probe claims - hotly denied - that Mr Osborne had tried to solicit a £50,000 (€62,000) donation for the Conservative Party from the Russian oligarch. Parliamentary standards commissioner John Lyon's dismissal of a complaint followed the Electoral Commission's earlier indication that no rules had been broken.
Taken with Mr Osborne's modest apology and acknowledgment that he "made a mistake" in the conduct of his meetings with Mr Deripaska, the latest developments could clear the way for renewed Conservative questions about the extent of Mr Mandelson's relationship with the Russian businessman.
Those questions continued to overshadow Mr Mandelson's trade visit to Russia, where he has again insisted "no conflict of interest" arose in his dealings with Mr Deripaska, which began shortly after his appointment as Britain's EU commissioner and before he formally assumed that post.
However, the economic crisis is set to dominate today's Commons exchanges between Mr Brown and Mr Cameron amid growing debate over the government's plan to increase borrowing in order to fund "investment" to help the economy through tough times.
Mr Brown yesterday urged energy firms to reduce petrol prices and household fuel bills to reflect the fall in global oil prices over recent weeks.
As Downing Street warned firms that the government was monitoring utility prices closely, shadow chancellor George Osborne said it would be "a scandal" if BP failed to cut prices at the pumps after announcing a £6.4 billion (€8 billion) profit in the three months to the end of September.