Remember the UK housing bubble?

“This is the start of a significant deterioration in risk assets, and while we may hit a new high in the S&P in the next few weeks it will be materially lower in the coming months.”

“This is the start of a significant deterioration in risk assets, and while we may hit a new high in the S&P in the next few weeks it will be materially lower in the coming months.” - By Ian Campbell, Reuters

Summary below by Anthony O'Brien

Just months ago a new house price bubble was seen by many as the great danger for the UK.

A chorus built for rate rises and special intervention in the mortgage market. Now the alarm calls are fading.

The talk of danger was spurred by fast annual house price rises – especially in London, where the annual increase in prices was 20.7 percent in the third quarter, based on data from mortgage lender Halifax. The national picture was less frothy, with an annual gain of 9.6 percent.

However pricey houses have been made just about affordable by low interest rates. Mortgage payments accounted for just 29.5 percent of average household income in the third quarter against a long-term average of 35.8 percent. But this mix of dear housing and cheap loans suggests vulnerability. A rise in interest rates might cause another fall in house prices.

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