Housing market faces period of correction
The former head of the Federal Reserve (the US central bank), has warned that the UK housing market is likely to undergo a period of correction.
In a press interview, Alan Greenspan spoke about rising interest rates bringing UK house price growth to a halt.
The world renowned economist, now is his 81st year, believes that recent increases in property prices, particularly in London and the South East, are unsustainable.
He also sees the UK’s economy as even more exposed than that of the US, to the current turmoil on the money markets.
Expanding on this, Mr Greenspan pointed out that unlike US home owners, more UK households have chosen standard variable rate mortgages over fixed-rate products.
The current instability of the money markets is leaving home owner with so-called standard variable interest rates at the same level as when the Bank of England base rate was a full percentage point higher than today.
Additionally, Mr Greenspan warned that the battle to control inflation could push UK interest rates into double figures in the coming years, if price rises are to be kept at their current low levels.
Already there are signs that after ten years of almost uninterrupted growth, the housing market is slowing.
Both Rightmove and the Royal Institution of Chartered Surveyors have recently reported a decrease in prices.
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