Housing downturn would not derail the economic recovery

RESEARCH released yesterday suggested that a housing market slowdown alone would not send the British economy into a crisis.

The combination of climbing mortgage rates and increasing property prices would not be enough to derail current growth, according to a report by credit ratings agency Moody’s.

“While a steeper slowdown in the housing market would lead to a slight slowdown in GDP growth over two to three years, it is unlikely to change the economic outlook significantly,” said Marie Diron of Moody’s.

The group suggest that if the Bank of England raised interest rates to three per cent, along with a 10 per cent increase in price-to-income ratios, housing would become less affordable, and perhaps slow down price growth, but would be insufficient on its own to prompt a crash.

However, the researchers added that with levels of household debt still elevated, principally from house purchases, British consumers were more exposed to negative economic shocks.

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