Greenspan predicts house market ‘heading for a fall’
One of the most influential economists in the world, Alan Greenspan, predicts that Britain’s housing market is heading for a downturn and it is not going to be pretty.
The US property market has been in a lot of trouble recently as a result of the global ‘credit crunch’ that has been afflicting financial institutions. However Greenspan claims the UK market could be hit a lot worse because there are so many more mortgages here that are adjustable-rate loans linked to interest rates.
Greenspan’s predictions came just days after the Bank of England decided to bail out Northern Rock. Northern Rock which is Britain’s fifth largest lender was sent into a crisis situation after news of the loan from the Bank of England. Customers of the bank queued up, sometimes over night, in order to withdraw their savings from the bank, and it is estimated that £2bn has been taken out since the panic began.
Greenspan also predicted that inflation could take off in the UK which may lead to the Bank of England having to raise interest rates into double figures in order to keep prices under control. This could lead to even more trouble in the property markets as well as with loan borrowers.
However it’s not all bad news as Greenspan is confident that the UK’s strong economy is in a good position to deal with any crises that does comes its way. This is because the UK has a much more flexible economy than many of our western counterparts.