Housing Market: Difference between revisions

In theory, in normal circumstances, there should be a natural house price correction in normal circumstances. Once house prices reachesreach aan unattainable level there should be a slowing down in growth. This has not be seen due to a number of factors. Firstly the government through [[Quantitative Easing]] has made vast sums of money available to the financial markets. It is in the interest of the financial sector to make mortgage loans with this money. While the money is made available to them at zero interest rates, they can loan the money out at much higher interest rates. This tends to lead to banks and building sites offering far higher multiples of salary to lenders to keep the money rolling. These loans then end up in the money markets where they multiple based on the logic that prices will keep rising. Higher multiples rather than helping lenders onto the housing market tends to push up prices to what can be afforded. As they multiples increase the percentage of a lenders salary spent on mortgage repayments increases (see figure 3 for more details). Under the section [[#Government purposely Inflating prices|Government purposely Inflating prices]] you can see how when the government have detected a slowing of housing market, they have introduced measures to ensure continued inflation.