From: "Andy Pandy" 
Newsgroups: uk.finance
Subject: Re: UK house prices about to fall over the cliff edge. Recession to follow ?
Date: Mon, 18 Jul 2005 15:31:16 +0100


"Tim"  wrote in message
news:dbgb81$e6n$1@nwrdmz01.dmz.ncs.ea.ibs-infra.bt.com...
> > > What do you think "they" could afford in the 1970's,
> > > when both interest rates and inflation was raging?
> > >
> > > How much do you think "they" could afford in 1990, with both
> > > base rates at 15% and 'high' house prices at the same time?
> >
> "Andy Pandy" wrote
> > Which is why house prices fell in real terms on both occasions!
>
> Yes, and which is also why there could be some way to go yet with current
> house prices before a similar crash happens -- because (un-)affordability
> levels haven't yet got to the same as they were in the 1970's or 1990.

No, but in the 1970's high inflation reduced the real level of the mortgage debt
quickly, making it easier for people to move upmarket after a few years. In the
1990's interest rates fell quite sharply from their 15% peak. Yet in both cases
price still fell significantly in real terms.

--
Andy