October 12, 2018

When the tide that turned safe homes into risky investment assets goes out, the wreckage will be horrific

Sir, Paul Mortimer-Lee in his letter “The tide that floated all ships is going out”, October 12, commenting on Martin Wolf’s “How to avoid the next financial crisis” (October 10), writes:“easy money has been pushing on a string as far as inflation is concerned”.

Not really, the problem is that, as I answered Martin Wolf in a letter published by FT 2006, is that when measuring inflation in housing, what is registered on the string is the cost of rental, not the prices of houses.

With low interest rates and especially low capital requirements for banks when financing the purchase of houses; unelected authorities have transformed houses from being safe homes into risky investment assets. When the tide goes out on that, the wreckage will be indeed absolutely horrific.