UK banks have fallen out of love with property. Since Spring 2007, the number of mortgage approvals has fallen by around 60 percent. At the height of the bubble, banks approved around 120,000 mortgages a month. In May 2012, they approved only 50,000.
If the UK economy is going to recapture those glorious pre-crisis, then the Bank of England is going to have to engineer some debt-fueled economic growth. That means that Banks will have to double up and start approving more mortgages.
The BoE has just put together a scheme that rewards faster credit growth with lower interest rates. It sounds like a great idea; what could possibly go wrong?
4 comments:
We haven't seen one of these charts for a while. More please.
What about London cash buyers ?
The UK has the second highest debt to GDP of any country in the world - http://www.inflation-hedge.blogspot.com/2012/05/why-invest-in-farmland-as-inflation.html. Over 500%. With all of that debt, its hard to imagine where the buyers are going to come from.
The first problem with Keynesianism is that the world Keynes was writing about is very different from ours. For a start, he didn't assume that countries would run budget deficits in a boom, before the bust even happened.
The second is that Keynes was very clever, and somewhat arrogant. His purported followers tend merely to be arrogant.
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