Do you think the stock market crash will affect our housing market?
（After all if interest rates keep rising surely we will join the Americans and start defaulting on our mortgages. House prices may then fall and we could all end up in recession. What do you think.)
Answer:
It is the over valued housing market which has lead to a credit crunch, which in turn, is affecting the stock market.
The real reason that the BOE has been raising interest rates is to try to contain the housing market, not to reign in inflation. This problem has been coming for a very long time, and follows years of irresponsible lending.
Banks and other financial institutions are now plagued with risky debt on their books, much of the funding having come from the money markets. The housing defaults in America have alerted the lending institutions that they can no longer afford to continue lending at current levels and money market interest rates are been driven up.
I very much doubt that the BOE will raise rates again, because they can now see that recession is probably on its way due to consumers reigning in their spending.
House have been grossly over-valued for a long time. This is a necessary correction.
Posted: August 8th, 2010 under US Stock Market.
Tags: stock market crash