Mortgages and housing in the near and long term - speech by David Miles

In a speech to the Home Builders Federation, David Miles - External Member of the Monetary Policy Committee - considers how persistent the observed fall in UK housing market activity might be, and the potential implications for house builders, mortgage funding and the MPC.
Published on 31 March 2011

David Miles begins by explaining that it is typical for long lived assets, such as property, to be adversely affected by economic downturns. But, he says, "...the impact on the housing and mortgage markets over the past few years has been greater than is usual even in a bad recession.... And that is because this recession started with the near collapse of the banking system." This leads him to ask whether the observed decline in activity is part of a "...painful transition from a position where the cost and availability of mortgage debt was unsustainable...", or whether we are stuck in a "...bad equilibrium of low confidence, low willingness to lend which is unwarranted by the risks, and impaired ability to buy".

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