Housing Affordability

• House price to Earnings ratio
• Mortgage costs to Incomes ratios

Overpriced Houses

The housing Bubble was a global phenomenon.

The Housing Crash

Housing Market and Economy

It is no conincidence that the fall in house prices led to a fall in economic growth.

Falling house prices depressess confidence and creates negative equity. It leads to equity withdrawal drying up and consumer spending falling.

Interest Rates

In response to falling house prices, the MPC cut interest rates to try and boost spending. But, even with lower interest rates, people didn’t return to the housing market.

This was a reflection that even cheaper interest rates don’t solve the shortage of finance experienced in the credit crunch.