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| International Monetary Fund chairperson Christine Lagarde is highlighting that something needs to be done about Britain's housing bubble. The IMF are suggesting either a rise in interest rates, more house building, or a combination of both. |
It's Friday. It's financial. It's Friday Financial with JULIAN SAYER.
Mortgage
misery on the way for millions.
This week I want to give a quick
recap on
what's been happening since I
started writing this blog back in February, both on the subjects I have
covered, and geographically around the world.
First domestically. A few weeks ago
I covered the problems building up in the housing market, and it looks as
though it will become even worse than I had feared. The Bank of England even
admits a housing bubble is forming, the bubble is out of control and when it
bursts it will cause misery for all involved. This is the concern for millions,
and if it does it will so damage the UK and its economy over the rest of this
decade. This paragraph was taken from the article below which is well
worth a read:
"The independent think tank
raised the alarm about the most vulnerable 770,000 households already with
mortgages, saying they were “doubly exposed”. Typically, they might have very
low equity in their home (less than five per cent), might be self-employed or have
an interest-only mortgage, making them less attractive to lenders. Secondly, it
would take only a relatively modest rise in rates by 2018 for a third of their
income to be eaten up by mortgage repayments."
How is this Governments gamble to
ride the housing market to stimulate growth for the UK economy going to end?
They will have to be very careful, it's already overheating and they have an
extremely difficult balancing act ahead, but these housing bubbles don't tend
to end well! As a whole the UK economy is growing, but it lacks of any real
strength, which means it is very susceptible to outside shocks, and everywhere
you look around the world, business is struggling and central banks are
panicking.
