Housing market crash as a result of rising interest rates could lead to a vicious downward spiral – John McLellan


If he can avoid the benefit being swallowed by a plunging pound he might be able to convince the markets his tax-cutting plan is funded, and so strengthen sterling and cut the cost of government borrowing. But it’s a massive if.
Abolishing the high tax band in England is already a failure because those it seeks to attract will look at the polls and decide it won’t happen or won’t last, so Mr Kwarteng might as well swallow his pride and accept it’s a postponed ambition.
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Hide AdThe urgency to get a firm grip on the national piggy bank was illustrated by a senior Credit Suisse strategist who this week cheerily predicted interest would hit 6.3 per cent to keep inflation under control, resulting in house prices “easily” dropping by between ten and 15 per cent.
That’s on a similar scale to the Banking Crash, when prices fell 15.9 per cent in 2008, but before anyone thinks that would solve Edinburgh’s affordability problem, knocking 15 points off prices just puts them back to where they were at the start of 2021.
It could, however, get worse. Unless inflation can be controlled quickly and those big interest rates avoided, there is a risk of a vicious circle of people selling up while buyers can’t find affordable loans.