Housing Market Preparing to Correct Itself
Britain's housing market is heading for a painful correction, according to the world's most renowned economist, central banker, and adviser to Gordon Brown, Mr Alan Greenspan. He warns of "difficulties" for UK homeowners, as interest rates continue to increase which, he predicts, will bring house price growth to a 'shuddering halt', he told The Daily Telegraph.
The warning arrives just days after the Bank of England bailed out Northern Rock, and at the beginning of the credit crunch that hit the City and markets around the world.
Mr Greenspan, the central banker for a number of United States presidents from Ronald Reagan to George W Bush, says that Britain's economy is more exposed to the financial turmoil than that the US markets were.
This prediction reflects previous reports from UK lenders that outlined the damage inflicted within their organizations after the US sub-prime crash last year. The already weakened banks are vulnerable, partially because their profit margins weakened, and partially because the battle for customers in 2006 saw lenders throw caution to the wind in their bid to win customers from other banks.
Mr Greenspan claims that Britain must overhaul their flagging education system or be left behind by other progressive countries. He also warns borrowers that the UK may experience double digit interest rates in the coming years, before the housing market balances.
The 81-year-old economist said that increases in house prices, especially in London and the South East, are unsustainable. "There are going to be some difficulties," he says. "Can [the boom] last No."
Published on October 11, 2007
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