The importance of house prices

There is a saying that when the US sneezes, Britain catches a cold. There are some interesting statistics coming out about the American housing market showing that in the past year median house prices have dropped by 9.3%. As a consequence 30 lenders have gone bankrupt and there is massive defaulting of debts, particularly where lenders provided 100% loans, or even 105 or 110% to pay for furniture. There’s no suggestion that this is about to happen here but with house prices at an all time high and borrowers self certifying for five times their salary our housing market is very susceptible to changes in interest rates. UK household debt is now £1,300 billion and repossessions are at the highest level since the early 1990s. Gordon Brown has managed to persuade commentators that he has safely handled the economy in his time as Chancellor but for many people things are not looking so rosy. As long as house prices remain on an upward trend, people and especially those who have got onto the property ladder will be happy, but just a modest adjustment will give those people another reason to question Labours suitability to remain in office.